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Aviva Life Insurance India
It is a private insurance company formed from collaboration between the Aviva
insurance group of UK and the Dabur group, one of India's oldest and top producers of
traditional health care products. Aviva's products are meant to provide customers
flexibility, transparency and value for money.
To demonstrate our commitment to "One Aviva, twice the value" we are aiming to
double earnings per share by 2012.
This ambition is based on total IFRS return, including investment volatility and non-
operating items over the weighted average number of shares.
COMPANY PROFILE
Aviva insurance group in UK with a history dating back to 1696, today stands as one of
the leading provider of life and pension products to Europe and other parts of the world.
The history of Aviva Life Insurance India starts at 1834 during nationalization
when Aviva was the largest foreign insurance group in terms of the compensation paid by
the Indian Government. In 1995 Aviva was the first foreign insurance company to start
its representative office in India. At present in Aviva Life Insurance
India, the Aviva group is a 26% share holder and the Dabur group holds 74% shares in
the joint venture.
The products of Aviva insurance group of India are:
LifeLong
LifeSaver or EasyLife Plus
Young Achiever
LifeBond and LifeBond Plus
PensionPlus
LifeShield
Freedom LifePlan
LifeBond5
The fund management operations of Aviva Life Insurance India are controlled from
Mumbai and the fund options includes Unitized With-Profits Fund and four Unit
Linked funds:
Protector Fund - The fund comprises of debt securities in the range of 60-
100%, equities in the range of 0-20% and money market and cash in the range of 0-
20%.
Secure Fund - The fund comprises of debt securities in the range of 50-100%,
equities in the range of 0-20% and money market and cash in the range of 0-20%.
Balanced Fund - The fund comprises of debt securities in the range of 50-
90%, equities in the range of 0-45% and money market and cash in the range of 0-
10%.
Growth Fund - The fund will comprise of debt securities in the range of 0-
50%, equities in the range of 0-85% and money market and cash in the range of 0-
20%.
These funds provide investment security to the capital of the customers.
Through their association with Basix (a micro financial institution) and other
NGOs, Aviva Life Insurance India have been able to reach out to those
underprivileged who had no access to insurances till day.
In Aviva Life Insurance India, thus, by combining protection and long term savings
the customers can safeguard and provide life products for their family with their
changing needs. Aviva is the world’s fifth-largest insurance group and the largest
insurance services provider in the UK.
We are one of the leading providers of life and pension products in Europe and are
actively growing our long-term savings businesses in Asia Pacific and the USA. Its main
activities are long-term savings, fund management and general insurance.
Vision: “One Aviva, twice the value”.
By working together across our businesses, we will optimize our performance in the
global marketplace and maximize the value we can generate for all our stakeholders.
INTRODUCTION
AN INTRODUCTION TO INSURANCE SECTOR IN INDIA
Insurance in India started without any regulation in the Nineteenth Century. It was
a typical story of a colonial era: a few British insurance companies dominating the market
serving mostly large urban centres. After the independence, it took a dramatic turn.
Insurance was nationalized. First, the life insurance companies were nationalized in 1956,
and then the general insurance business was nationalized in 1972. Only in 1999 private
insurance companies have been allowed back into the business of insurance with a
maximum of 26% of foreign holding. In what follows, we describe how and why of
regulation and deregulation. The entry of the State Bank of India with its proposal of
bank assurance brings a new dynamics in the game. We study the collective experience
of the other countries in Asia already deregulated their markets and have allowed foreign
companies to participate. If the experience of the other countries is any guide, the
dominance of the Life Insurance Corporation and the General Insurance Corporation is
not going to disappear any time soon.
Insurance under the British Raj
Life insurance in the modern form was first set up in India through a British
company called the Oriental Life Insurance Company in 1818 followed by the Bombay
Assurance Company in 1823 and the Madras Equitable Life Insurance Society in 1829.
All of these companies operated in India but did not insure the lives of Indians. They
were there insuring the lives of Europeans living in India. Some of the companies that
started later did provide insurance for Indians. But, they were treated as "substandard"
and therefore had to pay an extra premium of 20% or more. The first company that had
policies that could be bought by Indians with "fair value" was the Bombay Mutual Life
Assurance Society starting in 1871.
The first general insurance company, Triton Insurance Company Ltd., was
established in 1850. It was owned and operated by the British. The first indigenous
general insurance company was the Indian Mercantile Insurance Company Limited set up
in Bombay in 1907. By 1938, the insurance market in India was buzzing with 176
companies (both life and non-life). However, the industry was plagued by fraud. Hence, a
comprehensive set of regulations was put in place to stem this problem (see Table 1). By
1956, there were 154 Indian insurance companies, 16 non-Indian insurance companies
and 75 provident societies that were issuing life insurance policies. Most of these policies
were cantered in the cities (especially around big cities like Bombay, Calcutta, Delhi and
Madras). In 1956, the then finance minister S. D. Deshmukh announced nationalization
of the life insurance business.
Monopoly Raj
The nationalization of life insurance was justified mainly on three counts.
(1) It was perceived that private companies would not promote insurance in rural areas.
(2) The Government would be in a better position to channel resources for saving and
investment by taking over the business of life insurance.
(3) Bankruptcies of life insurance companies had become a big problem (at the time of
takeover, 25 insurance companies were already bankrupt and another 25 were on the
verge of bankruptcy). The experience of the next four decades would temper these views.
AN OVERVIEW OF INSURANCE INDUSTRY
Insurance has a long history in India. Life Insurance in its current form was introduced in
1818 when Oriental Life Insurance Company began its operations in India. General
Insurance was however a comparatively late entrant in 1850 when Triton Insurance
company set up its base in Kolkata. History of Insurance in India can be broadly
bifurcated into three eras: a) Pre Nationalization b) Nationalization and c) Post
Nationalization. Life Insurance was the first to nationalize in 1956. Life Insurance
Corporation of India was formed by consolidating the operations of various insurance
companies. General Insurance followed suit and was nationalized in 1973. General
Insurance Corporation of India was set up as the controlling body with New India, United
India, National and Oriental as its subsidiaries. The process of opening up the insurance
sector was initiated against the background of Economic Reform process which
commenced from 1991. For this purpose Malhotra Committee was formed during this
year who submitted their report in 1994 and Insurance Regulatory Development Act
(IRDA) was passed in 1999. Resultantly Indian Insurance was opened for private
companies and Private Insurance Company effectively started operations from 2001.
LITRATURE REVIEW
Insurance Market- Present:
The insurance sector was opened up for private participation four years ago. For years
now, the private players are active in the liberalized environment. The insurance market
have witnessed dynamic changes which includes presence of a fairly large number of
insurers both life and non-life segment. Most of the private insurance companies have
formed joint venture partnering well recognized foreign players across the globe.
There are now 29 insurance companies operating in the Indian market – 14 private life
insurers, nine private non-life insurers and six public sector companies. With many more
joint ventures in the offing, the insurance industry in India today stands at a crossroads as
competition intensifies and companies prepare survival strategies in scenario.
There is pressure from both within the country and outside on the Government to increase
the Foreign Direct Investment (FDI) limit from the current 26% to 49%, which would
help JV partners to bring in funds for expansion.
There are opportunities in the pensions sector where regulations are being framed. Less
than 10 % of Indians above the age of 60 receive pensions. The IRDA has issued the first
license for a standalone health company in the country as many more players wait to
enter. The health insurance sector has tremendous growth potential, and as it matures and
new players enter, product innovation and enhancement will increase. The deepening of
the health database over time will also allow players to develop and price products for
larger segments of society.
State Insurers Continue To Dominate There may be room for many more
players in a large underinsured market like India with a population of over one billion.
But the reality is that the intense competition in the last five years has made it difficult for
new entrants to keep pace with the leaders and thereby failing to make any impact in the
market.
Also as the private sector controls over 26.18% of the life insurance market and over
26.53% of the non-life market, the public sector companies still call the shots.
The country’s largest life insurer, Life Insurance Corporation of India (LIC), had a share
of 74.82% in new business premium income in November 2005.
Similarly, the four public-sector non-life insurers – New India Assurance, National
Insurance, Oriental Insurance and United India Insurance – had a combined market share
of 73.47% as of October 2005. ICICI Prudential Life Insurance Company continues to
lead the private sector with a 7.26% market share in terms of fresh premium, whereas
ICICI Lombard General Insurance Company is the leader among the private non-life
players with a 8.11% market share. ICICI Lombard has focused on growing the market
for general insurance products and increasing penetration within existing customers
through product innovation and distribution.
Reaching Out To Customers No doubt, the customer profile in the insurance
industry is changing with the introduction of large number of divergent intermediaries
such as brokers, corporate agents, and bancassurance.
The industry now deals with customers who know what they want and when, and are
more demanding in terms of better service and speedier responses. With the industry all
set to move to a detariffed regime by 2007, there will be considerable improvement in
customer service levels, product innovation and newer standards of underwriting.
Intense Competition In a de-tariffed environment, competition will manifest itself in
prices, products, underwriting criteria, innovative sales methods and creditworthiness.
Insurance companies will vie with each other to capture market share through better
pricing and client segmentation.
The battle has so far been fought in the big urban cities, but in the next few years,
increased competition will drive insurers to rural and semi-urban markets.
Global Standards While the world is eyeing India for growth and expansion, Indian
companies are becoming increasingly world class. Take the case of LIC, which has set its
sight on becoming a major global player following a Rs280-crore investment from the
Indian government. The company now operates in Mauritius, Fiji, the UK, Sri Lanka, and
Nepal and will soon start operations in Saudi Arabia. It also plans to venture into the
African and Asia-Pacific regions in 2006.
The year 2005 was a testing phase for the general insurance industry with a series of
catastrophes hitting the Indian sub-continent.
However, with robust reinsurance programs in place, insurers have successfully managed
to tide over the crisis without any adverse impact on their balance sheets.
With life insurance premiums being just 2.5% of GDP and general insurance premiums
being 0.65% of GDP, the opportunities in the Indian market place is immense. The next
five years will be challenging but those that can build scale and market share will survive
and prosper.
SWOT ANALYSIS
The SWOT analysis of Insurance sector is as follows:-
1. Strength-Very good policies of life coverage.
2. Weaknesses:-unable to convince the people about the products. There are not much advisors for the insurance companies
3. Oppourtunities:-Untapped rural sector and small towns
4. Threats:-growing competition from larger MNC's.
INDIAN COMPANIES WITH FOREIGN PARTNERSHIP
Indian Partner International Partner
Alpic Finance Allianz Holding, Germany
Tata American Int. Group, US
CK Birla Group Zurich Insurance, Switzerland
ICICI Prudential, UK
Sundaram Finance Winterthur Insurance, Switzerland
Hindustan Times Commercial Union, UK
Ranbaxy Cigna, US
HDFC Standard Life, UK
Bombay Dyeing General Accident, UK
DCM Shriram Royal Sun Alliance, UK
Dabur Group Allstate, US
Kotak Mahindra Chubb, US
Godrej J Rothschild, UK
Sanmar Group Gio, Australia
Cholamandalam Guardian Royal Exchange, UK
SK Modi Group Legal & General, Australia
20th Century Finance Canada Life
M A Chidambaram Met Life
Vysya Bank ING
Directors Report
REVIEW OF OPERATIONS:
The turnover of the company during the year is Rs.50.28.Lacs compared to 1423.33 Lacs.
Showing decrease by Rs.1373.05 Lacs from the corresponding year ended 31st March,
2007 due to fall in marketing conditions.
FIXED DEPOSIT:
The company has not accepted any fixed deposits during the year.
AUDITORS:
Auditors of the company M/s. J. P. Saboo & Co. Chartered Accountants of Surat, will
retire at the conclusion of the ensuing 24th Annual Genera Meeting from the office of the
Auditors and being eligible offer themselves for re-appointment from the end of the
ensuing Annual General Meeting till the. conclusion of the next Annual General Meetin
at a remuneration payable as may be decided. As required under the provisions of
Section 224(lB),the Company has received certificate that the. appointment, if made shall
be within the limits as set down in said section.
DIRECTORS;
In accordance with Article 116 of the Articles of Association of the company, Shri Jatin
Gupta & Sbri Pawan Gupta retire by rotation and being eligible, offers himself for-their
re-appointment. The Board recommends their re-appointment Shri Mohan Gupta, Shri
Shyamsunder Gupta and Shri Sunilkumar Gupta had resigned as Directors of the
Company w.cf. 15-12-2007,15- 12-2007 and 05-01-2008 respectively.
PARTICULARS OF EMPLOYEE :
None of the employee is in receipt of remuneration as prescribed under Companies
(Particulars of Employees) Rule, 1975 and hence information as required under section
217{2AA) read with Companies (Particulars of Employees) Rule, 1975 not provided
herewith.
CONSERVATION OF ENRGY, TECHNOLOGY ABSORPTION, FOREIGN
EARNING & OUTGO:
The particulars prescribed by the Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988 as to conservation of energy; technology absorption is
Not Applicable since project is yet to start. There is no Foreign Exchange earning and
Outgo.
INSURANCE:
The company has made necessary arrangements for adequately insuring interests in
various properties.
DIRECTORS RESPONSIBILITY STATEMENT:
As required under section 217(2AA) of the Companies Act, 1956 your Directors state:
1. That in the preparation of the annual accounts, the applicable accounting standards
have been followed.
2. That the accounting policies selected and applied are consistent and the judgments
and estimates made are reasonable and prudent so as to give a true and fair view of the
state of affairs of the company at the end of the financial year ended 31st March, 2008
and of the profit or loss of the company for that period.
3. That proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act, 1956 for
safeguarding the assets of the company and for preventing and detecting fraud and other
irregularities.
4. That the annual accounts have been prepared on a going concern basis.
CORPORATE GOVERNANCE REPORT:
Your company is committed to maintain the highest standards of corporate governance.
Your Directors adhere to the requirements set out by the Securities and Exchange Board
of India in respect of Corporate Governance Practices and have implemented all
stipulations prescribed, Report on Corporate Governance as stipulated under clause 49 of
the listing agreement with stock exchange is annexed which forms part of the annual
report. Certificate from Statutory Auditors, confirming compliance of conditions of
corporate governance as stipulated under aforesaid clause 49 is annexed to this report.
COMPLIANCE CERTIFICATE :
The Company has availed Secretarial Compliance Certificate for the under review form
the Practicing Company Secretary pursuant to the proviso of section 383 A of the
Companies Act, 1956 and a copy of the same is attached with this report.
LISTING:
The shares of your company are listed on Bombay Stock Exchange. The listing fees for
the year 2008-09 have been paid to The Bombay Stock Exchange Limited.
DEPOSITORY SYSTEM:
Your company has established electronic connectivity with the both the depositories,
NSDL & CDSL. In view of numerous advantages offered by the depository system,
members of the company are requested to avail the facility of dematerialization of the
companys shares on NSDL SCDSL.
ACKOWLEDGEMENT;
The Directors place on record the appreciation and gratitude for the co-operations and
assistance extended by the Banks, Government etc. The company will make all effort to
meet the aspiration of its shareholders and wish to sincerely thank them for their whole
hearted co- operation and support at all times.
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Going Concern
As a consequence of the Company’s considerable financial resources, the directors
believe that the Company is well placed to manage its business risks successfully
despite the current uncertain economic outlook.
After making enquiries, the directors have a reasonable expectation that the Company
has adequate resources to continue in operational existence for the foreseeable
future. For this reason, they continue to adopt the going concern basis in
preparing the financial statements.
The Company is expected to continue to generate positive cash flows on its own
account for the foreseeable future. The Company participates in the Aviva
Group’s centralized treasury arrangements and so shares banking arrangements
with fellow subsidiaries.
The directors, having assessed the responses of the directors of a fellow group
company, Aviva International Insurance Limited, which maintains the centralized
arrangement, have no reason to believe that a material uncertainty exists that may cast
doubt about the ability to continue with the current banking arrangements.
Financial Position and Performance
The financial position of the Company at 31 December 2009 is shown in the statement
of financial position shown below
Financial instruments
The business of the Company includes use of financial instruments. Details of the
Company's risk management objectives and policies and exposures to risk relating to
financial instruments are set out in note 8 to the financial statements.
Dividends
Interim ordinary dividends of £340 million were declared and paid during 2009
(2008: £475 million). The directors do not recommend a final ordinary dividend for
the year (2008: £nil). The total cost of dividends paid during the year, including
preference dividends, amounted to £361million (2008: £567 million, including the
2007 final dividend).
Directors’ interests
None of the directors who held office at 31 December 2009 held any interest in the
Company’s shares.
Authority to purchase own shares
At the Annual General Meeting held on 25 April 2006, shareholders renewed
the Company’s authority to make market purchases of up to 140 million 8 7/8 %
preference shares and up to 110 million 7 7/8 % preference shares. This authority
remains in place until 24 April 2011 but was not used in the year.
Creditor payment policy and practice
The Company has no trade creditors.
Directors’ Liabilities
Aviva plc, the Company’s parent, has granted an indemnity to the directors
against liability in respect of proceedings brought by third parties, subject to the
conditions set out in the Companies Act 1985. This indemnity was granted in 2004
and the provisions in the Company's Articles of Association constitute "qualifying
third party indemnities" for the purposes of sections 309A to 309C of the Companies
Act 1985. These qualifying third party indemnity provisions remain in force as at the
date of approving the Directors’ report by virtue of the transitional provisions to the
Companies Act 2006.
Disclosure of Information to the Auditor Each person who was a director of the Company on the date that this report
was approved, confirms that so far as the director is aware, there is no
relevant audit information, being information needed by the auditor in
connection with preparing his report, of which the auditor is unaware. Each director
has taken all the steps that he ought to have taken as a director in order to make
himself aware of any relevant audit information and to establish that the auditor is
aware of that information.
Auditor A resolution is to be proposed at the Annual General Meeting for the reappointment of
Ernst & Young LLP as auditor of the Company. A resolution will also be proposed
authorizing the directors to determine the auditor’s remuneration.
The Combined Code on Corporate Governance
The Company is a wholly-owned subsidiary of Aviva plc, a company listed on
the London Stock Exchange. The Combined Code on Corporate Governance sets
out standards of good practice in the form of principles and provisions on how
companies should be directed and controlled to follow good governance practice. The
Financial Services Authority requires companies listed in the UK to disclose, in
relation to Section 1 of the Combined Code, how they have applied its principles and
whether they have complied wit its provisions throughout the accounting year. Where
the provisions have not been complied with companies must provide an explanation
for this.
It is the Board’s view that Aviva plc has been fully compliant throughout the
accounting period with the provisions set down in Section 1 of the Combined
Code, apart from a period during the year when the majority of the members of the
Nomination Committee was not independent non-executive directors. This was due to
the resignation of Nikesh Arora, a non-executive director, who resigned following his
relocation to the United States. The Aviva plc Directors’ Report sets
out details of how the Aviva group has applied the principles and complied
with the provisions of the Combined Code during 2009.
The Company has listed preference shares and the payment of dividends to the
preference shareholders is reviewed by the Aviva plc Audit Committee and approved
by the directors of the Company. There are no other significant risks associated with
the Company’s assets and liabilities, and the Company seeks to maintain sufficient
funds to meet dividends payable on the preference shares as they fall due.
Statement of Directors’ Responsibilities
The directors are required to prepare financial statements for each accounting
period that comply with the relevant provisions of the Companies Act 1985, the
Companies Act 2006 and International Financial Reporting Standards (IFRS) as
adopted by the European Union (“EU”), and which present fairly the financial
position, financial performance and cash flows of the Company at the end of the
accounting period. A fair presentation of the financial statements in accordance with
IFRS requires the directors to:
select suitable accounting policies and verify they are applied consistently
in preparing the financial statements on a going concern basis unless it is
inappropriate to presume that the Company will continue in business;
Present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
provide additional disclosures when compliance with the specific
requirements in IFRS is insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the Company’s financial
position and financial performance; and
state that the Company has complied with applicable IFRS, subject
to any material departures disclosed and explained in the financial statements.
The directors are responsible for maintaining proper accounting records which
are intended to disclose with reasonable accuracy, at any time, the financial
position of the Company. They are also ultimately responsible for the systems of
internal control maintained for safeguarding the assets of the Company and for the
prevention and detection of fraud and other irregularities.
Directors’ responsibility statement pursuant to the Disclosure and Transparency Rule 4
The directors confirm that, to the best of each person’s knowledge:
a) the Company financial statements in this report, which have been prepared
in accordance with IFRS as adopted by the EU, International Financial
Reporting Interpretations Committee’s interpretations and those parts of the
Companies Act 2006 applicable to companies reporting under IFRS, give a
true and fair view of the assets, liabilities, financial position and results of the
Company; and
b) the directors’ report contained in this report includes a fair review
of the development and performance of the business and the position of the
Company, together with a description of the principal risks and uncertainties that
they face.
Independent auditor’s report to the members of General Accident plc
We have audited the financial statements of General Accident plc for the year ended
31 December 2009 which comprise the Accounting Policies, the Income Statement,
the Statement of Comprehensive Income, and the Statement of Changes in Equity, the
Statement of Financial Position, the Statement of Cash Flows, and the related notes 1
to 10. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
This report is made solely to the company’s members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or
for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ Responsibilities Statement (set out on page
6), the directors are responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view. Our responsibility is to audit the
financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are appropriate to the
company’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion the financial statements:
Give a true and fair view of the state of the company’s affairs as at 31
December 2009 and of its profit for the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the
European Union; and
have been prepared in accordance with the requirements of the Companies
Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, the information given in the Directors’ Report for the financial year
for which the financial statements are prepared is consistent with the financial
statements.
Auditor's Report
1. We have audited the attached balance sheet of AVIVA INDUSTRIES LIMITED,
MUMBAI as at 31st March 2008, the profit and loss account and also the (cash flow
statement) for the year ended on that date annexed thereto. These financial statements are
the responsibility of the companys management. Our responsibility is to express an
opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with.the auditing standards generally accepted
in India. Those Standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosure
in the financial statement. An audit also includes assessing the accounting principal used
and significant estimates made by management, as well as evaluating the overall financial
statement presentation: We believe that our audit provides a reasonable basis for our
opinion.
3. As required by the Companies (Auditors Report) Order, 2003 issued by the Central
Government of India in term of sub - section (4A) of section 227 of the Companies Act,
1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 .
and 5 of the said Order.
4. Further to our comments in the Annexure referred to above, we report that.
(i) We have obtained all the information and explanations, which to the best of our
knowledge and belief were necessary for the purposes of our audit.
(ii) In our opinion, proper books of account, as required by law have been kept by the
company so far as appears from our examination of those books.
(iii) The balance sheet, profit and loss account and cash flow statement dealt with by this
report are in agreement with the books of account.
(iv) In pur opinion, the balance sheet, profit and loss account and cash flow statement
dealt with by this report comply with the accounting standards referred to in sub ^section
(3C) of section 211 of the Companies Act, 1956.
(v) On the basis of written representation received from the directors, as on 31st March
2008 and taken on record by the Board of Directors, we report that none of the directors
Is disqualified as on 31st March 2008, from being appointed as a . director in teiius of
clause (g) of sub - section (1) of section 274 of the Companies Act, 1956
(vi) In our opinion and to the best of our information and according to the explanations
given to us, the said accounts give the information required by the Companies Act, 1956,
in the manner so required and give a true and fair view in conformity with the accounting
principles generally accepted in India.
(a) in the case of the balance sheet, of the state of affairs of the company as at 31st
March 2008 .
(b) in the case 67 the profit and loss account, of the Loss for the year ended on that date ;
and
(c) in the case of the cash flow statement, of the cash flows for the year ended on that
date.
Annexure referred to in paragraph 3 of our report of even date.
(i) (a) The company has maintained proper records showing full particulars, including
quantitative details and situation of fixed assets;
(b) All the assets have not been physically verified by the management during the year
but there is a regular programme of verification which, in our opinion, is reasonable
having regard to the size of the company and the nature of its assets. No material
discrepancies were noticed to such verification
(c) Some part of old fixed assets has been disposed off during the period. According to
the information and explanations given to us, we are of the opinion that the sale of the
said part of fixed assets has not affected the going concern status of the company.
(ii) (a) The inventory has been physically verified during the year by the management.
In our opinion the frequency of verification is reasonable.
(b) The procedures of physical verification of inventories followed by the management
are reasonable and adequate in relation to the size of the company and the nature of its
business.
(c) The company Is maintaining proper records of inventory. The discrepancies noticed
on verification between the physical stocks and the books records were not material.
(iii) (a) The company has not granted/taken loans to/from companies, firms or other
parties listed in the register maintained under section 301 of the Companies Act, 1956.
(iv) In our opinion and according to the information and explanations given to us, there
are adequate internal control procedures commensurate with the size of the company and
the nature of its business with regard to purchases of inventory, fixed assets and with
regard to the sale of goods. During the course of our audit, we have notobserved any
continuing failure to correct major weaknesses in internal controls.
(v) (a) According to the information and explanations given to us, we are of the opinion
that the transactions that need to be entered into the register maintained under section 301
of the Companies Act, 1956 have been So entered.
(b) In our opinion and according to the informations and explanations given to us, the
transactions made in pursuance of the contracts or arrangements entered in the register
maintained under section 301 of the Companies Act, 1956 and exceeding the value of
rupees five lacs In respect of any party during the year have been.made at.prices which
are reasonable having regard to prevailing. market prices at the relevant time.
(vi) In our opinion and according to the information and explanations given to us, the
company has complied with the provisions of sections 58A arid 58AA of the Companies
Act;1956 and the Companies (acceptance of Deposits) Rules, 1975.
vii) In our opinion, the company has an internal control system commensurate with the
size and nature of its business.
(viii) Since this is being Trading unit, hence sec 209 (1) (d) of the Companies Act, 1956
is not applicable.
(ix) (a) The company is regular in depositing with appropriate authorities undisputed
statutory dues including income tax, sales tax, custom duty, cess and other material
statutory dues applicable to it.
(b) According to the information and explanations given to us, no undisputed amounts
payable in respect income tax, wealth tax, sales tax, custom duty, excise duty and cess
were in arrears, as at 31st March, 2008 for a period of more than six months from the date
they became payable, other than income tax for the immediate previous year.
(c) According to the information and explanation given to us, there are no dues of sale
tax, customs duty, wealth tax, excise duty and cess, which have not been deposited on
account of any dispute.
(x) The company has incurred cash losses during the financial year covered by our audit
and immediately preceding financial year and also company has no accumulated losses.
(xi) In our opinion and according to the information and explanations given to us, the
company has not defaulted in repayment of dues to a financial institution, bank or
debenture holders.
(xii) The company has not granted loans and advances on the basis of security by way of
a pledge of share, debentures and other securities.
(xiil) The company is not a chit fund or a nidhi mutual benefit fund/society. Therefore;
the provisions of clause 4 (xiil) of the Companies (Authors Report) Order, 2003 are not
applicable to the company.
(xiv) The company is not dealing in or trading in shares, securities, debentures and other
investments except as an investment. Accordingly, the provisions of clause 4 (xiv) of the
Companies (Auditors Report) Order, 2003 are not appllcable to the company.
(xv) in our opinion and informed by the management, the company has not given
guarantees for loans taken by others from banks or financial institutions.
(xvi) In our opinion, the term loans have been applied for the purpose for which they
were raised.?;
(xvii) According to the information and explanations given to us and on an overall
examination of the balance sheet of the company, we report that the no funds raised on
short
- term basis have been used for long
- term investment. No long - term funds have been used to finance short
- term assets except permanent working capital.
(xviii) According to the information and explanations given to us, the company has not
made any allotment of preferential shares during the financial year.
(xix) The company has no issued and / or outstanding debentures at the end of the year.
(xx) The company has not issued and raised money by public issues during the year.
(xxi) According to the information and explanations given to us, no fraud on or by the
Company has been noticed or reported during the course of our audit. Find your favourite
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Accounting policies
General Accident plc (“the Company”) is a public limited company incorporated
and domiciled in the United Kingdom (“UK”). The following accounting
policies have been applied consistently in dealing with items which are
considered material in relation to the Company’s financial statements.
1. GENERAL
i) The Financial Statements have generally been prepared on the historical cost
convention.
ii) Accounting policies not specifically referred to otherwise are in consonance with
generally accepted
2. BASIS OF ACCOUNTING
The company follows the mercantile system of accounting generally except otherwise
stated herein below.
3. FIXED ASSETS
Fixed Assets are stated at cost less accumulated depreciation.
4. DEPRECIATION
a) Depreciation on fixed assets has been provided at the rates and in accordance with
the provisions of Schedule XIV of the Companies Act,1956 on SLM Method on days
prorata on basis of date put to use of the assests. However, no depreciation has been
charged on fixed assets during the year and profit of the company has been affected
adversely to that extent.
5. INVENTORIES
The inventory has been valued at lower of cost or net relisable price, however there is
no closing stock at the
6. REVENUE AND EXPENDITURE RECOGNITION
Revenue Is recognised and expendeiture is accounted for on their accrual except
claims in respect of goods purchased and sold & Insurance, which are accounted for
on cash basis.
7. INVESTMENT
Investment are valued at Cost. No provision has been made for depreciation of the
market value of the Investment.
(A)Basis of presentation
The financial statements of the Company have been prepared in accordance
with International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB) and applicable at 31
December 2009, and endorsed by the European Union. The date of transition to
IFRS was 1 January 2004.
(B)Use of estimates
The preparation of financial statements requires the Company to make estimates and
assumptions that affect items reported in the statement of financial position and
income statement and the disclosure of contingent assets and liabilities at the date of
the financial statements. Although these estimates are based on management’s
best knowledge of current facts, circumstances and to, some extent, future
events and actions, actual results ultimately may differ from those estimates,
possibly significantly.
(C)Investment income
Investment income consists of interest receivable for the year. Interest receivable is
recognized as it accrues, taking into account the effective yield on the investment.
(D)Financial instruments
Loans to, or from other Aviva Group companies are recognized when cash is
advanced to, or received from these companies. These loans are subsequently
carried at amortized cost. The Company reviews the carrying value of loans on a
regular basis. If the carrying value of the loan is greater than the recoverable amount,
the carrying value is reduced through a charge to the income statement in the period
of impairment.
(E) Cash and cash equivalents
Cash and cash equivalents consist of cash at banks and in hand.
(F) Income taxes
The current tax expense is based on the taxable result for the year, after any
adjustments in respect of prior years. Tax, including tax relief for losses if
applicable, is allocated over profits before taxation and amounts charged or
credited to reserves as appropriate.
Provision is made for deferred tax liabilities, or credit taken for deferred tax
assets, using the liability method, on all material temporary differences between
the tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred tax assets are recognized to the extent that it is probable that
future taxable profit will be available against which the temporary differences can be
utilized.
(G) Share capital
Equity instruments An equity instrument is a contract that evidences a residual interest in the assets of an entity after deducting all its liabilities. Accordingly, a financial instrument is treated as equity if:
I. There is no contractual obligation to deliver cash or other financial
assets or to exchange financial assets or liabilities on terms that may be
unfavorable; and
II. The instrument is a non-derivative that contains no contractual obligation to
deliver a variable number of shares, or is a derivative that will be settled only
by the Company exchanging a fixed amount of cash or other assets for a fixed
number of the Company’s own equity instruments.
Dividends
Dividends on ordinary shares are recognized in equity in the period in which
they are paid and, for the final dividend, approved by shareholders. Dividends
on preference shares are recognized in the period in which they are declared
and appropriately approved.
Research Methodology
Market research is the process of systematic gathering, recording and analyzing of
data about customers, competitors and the market. Marketing research (also called
consumer research) is a form of business research. It is a form of applied sociology
which concentrates on understanding the behaviors, whims and preferences, of
consumers in a market-based economy. Market research can help create a business
plan, launch a new product or service, fine tune existing products and services, expand
into new markets etc. It can be used to determine which portion of the population will
purchase the product/service, based on variables like age, gender, location and income
level. It can be found out what market characteristics your target market has. With market
research companies can learn more about current and potential customers.
The purpose of market research is to help companies make better business decisions
about the development and marketing of new products and in the case of financial market
research, it shows the company worthiness and position in front of people.
Market Research Process
Defining the Research Problem
Selecting and Establishing Research Design
Select the Research Design
Identify Information types and Sources
Determining and Design Research Instrument
Collecting and Analyzing Data
Formulate Findings
Method Adopting of Data Collection
There are two types of data collection technique. i.e.
Primary Data and Secondary Data.
In my research project there is no need to collect primary data. I want only secondary data that I have been collected by different sources.
Internet- From the internet we have take the histories of companies for the introduction part. We search some data from the website of company and search engine like Google.
Books- Books are also helpful us for the data research. We have taken help of books to calculate the ratios and analyzing the financial statements like Profit & Loss account and Balance sheet etc.
FINANCIAL STATEMENT
Profit & loss Account, Balance Sheet and Key Ratio of Aviva life
insurance
PROFIT & LOSS ACCOUNT OF AVIVA LIFE INSURANCE COMPANY
Rs in Crores
MARCH 2007 MARCH 2008 MARCH 2009
12 Months 12 Months 12 Months
INCOME
Sales Turnover 0.00 14.23 0.47
Excise Duty 0.00 0.00 0.00
Net Sales 0.00 14.23 0.47
Other Income 0.05 0.01 0.03
Stock Adjustments 0.00 0.00 0.00
Total Income 0.05 14.24 0.05
Expenditure
Raw Materials 0.00 13.91 0.45
Power & fuel Cost 0.00 0.00 0.00
Employees Cost 0.00 0.09 0.01
Other Manufacturing Expenses
0.00 0.00 0.00
Selling & Admin expenses
0.00 0.00 0.00
Miscellenous Expenses
0.01 0.11 0.06
Preoperative Expenses capital
0.00 0.00 0.00
Total Expenses 0.01 14.11 0.52
March 2007 March 2008 March 2009
12 Months 12 Months 12 Months
Operating Profit -0.01 0.12 -0.05
PBDIT 0.04 0.13 -0.02
Interest 0.00 0.00 0.00
PBDT 0.04 0.13 -0.02
Depreciation 0.01 0.00 0.00
Other written off 0.00 0.00 0.00
Profit Before Tax 0.03 0.13 -0.02
Extra ordinary items -0.01 0.00 0.00
PBT ( Post extra-ord
items)
0.02 0.13 -0.02
Tax 0.00 0.05 0.01
Reported Net Profit 0.03 0.07 -0.02
Total value addition 0.01 0.19 0.07
Preference dividend 0.00 0.00 0.00
Equity dividend 0.00 0.00 0.00
Corporation dividend
tax
0.00 0.00 0.00
Per share data
(annualized)
Shares in issue (lakhs) 14.99 14.99 14.99
Earning per share 0.18 0.50 -0.12
(rs)
Equity dividend (%) 0.00 0.00 0.00
Book value (rs) 12.34 30.99 30.87
BALANCE SHEET OF AVIVA LIFE INSURANCE
Rs in Crores
March 2007 March 2008 March 2009
12 Months 12 Months 12 Months
Sources of Funds
Total share capital 1.50 1.50 1.50
Equity share capital
1.50 1.50 1.50
Share Application money
0.00 0.00 0.00
Preference share cappital
0.00 0.00 0.00
Reserves 0.35 3.15 3.13
Revalution reserves
0.00 0.00 0.00
Net Worth 1.85 4.65 4.63
Secured loans 0.00 0.02 0.01
Unsecured loans 0.09 1.00 0.75
Total debt 0.09 1.02 0.76
Total Liabilities 1.94 5.67 5.39
March 2007 March 2008 March 2009
Application of Funds
Gross Block 0.13 0.80 0.69
Less:-Accum-Depreciation
0.11 0.08 0.07
Net Block 0.02 0.72 0.62
Capital work in progress
0.00 0.00 0.00
Investments 0.69 1.24 1.24
Inventories 0.00 0.00 0.00
Sundry debtors 0.00 1.07 1.38
Cash & Bank balance
0.03 0.10 0.08
Total Current Assets
0.03 1.17 1.46
Loans & Advances 1.22 3.46 3.69
Fixed Deposits 0.00 0.00 0.00
Total CA,Loans &Advances
1.25 4.63 5.15
Deferred credit 0.00 0.00 0.00
Current Liabilities 0.03 2.21 2.92
Provisions 0.00 0.04 0.04
Total CL & Provisions
0.03 2.25 2.96
Net Current Assets 1.22 2.38 2.19
Miscellaneous expenses
0.00 1.31 1.35
Total Assets 1.93 5.65 5.40
Current Liabilities 0.00 0.00 0.00
Book Value 12.34 30.99 30.87
Key Financial Ratios of Aviva
Rs in crores
March 2007 March 2008 March 2009
Investment Valuation Ratios
Face Value 10.00 10.00 10.00
Dividend per share - - -
Operating profit per share (Rs)
-0.05 0.84 -0.27
Net operating profit per share (Rs)
- 94.91 3.16
Free Reserves per share (Rs)
- -8.77 -9.00
Bonus in equity capital
- - -
Profitability Ratios - - -
Operating profit margin (%)
- - -
Profit before Interest & tax margin (%)
- - -
Gross profit margin (%)
- - -
Cash profit margin (%)
- - -
Adjusted net profit margin (%)
92.30 0.55 -3.67
Net profit margin (%)
52.42 0.52 -3.67
Adjusted net profit margin (%)
- - -
Return on capital employed (%)
- - -
Return on net worth (%)
1.46 - -
Adjusted return on net worth (%)
2.18 2.28 -0.56
Return on assets excluding revaluation
1.37 0.94 -0.22
Return on assets including revaluation
1.37 0.94 -0.22
Return on long term funds (%)
1.89 2.28 -0.21
Liquidity & Solvency Ratio
Current ratio 37.47 2.06 1.73
Quick ratio 37.20 2.06 1.73
Debt equity ratio 0.05 0.22 0.16
Long term debt equity ratio
0.05 0.22 0.16
Debt equity ratio
Interest cover - - -
Total debt to owners fund
0.05 0.22 0.16
Financial charges coverage ratio
- - -
Financial charges coverage ratio post tax
- - -
Management efficiency ratio
Inventory turnover ratio
- - -
Debtor turnover ratio
- - 0.39
Investment turnover ratio
- - -
Fixed asset turnover ratio
- - -
Total assets turnover ratio
- - -
Asset turnover ratio
- 17.74 0.69
Average raw material holding
- - -
Average finished goods held
- - -
Number of days in working capital
- 60.42 1,654.04
Profit & Loss account ratios
Material cost consumption
- 97.76 94.37
Imported composition of raw material consumed
- - -
Selling distribution cost composition
- - -
Expenses composition of total sales
- - -
Cash flow indication ratios
Dividend payout ratio net profit
- - -
Dividend payout ratio cash profit
- - -
Earning retention ratio
100.00 100.00 -
Cash earnings retention ratio
100.00 100.00 -
Adjusted cash 1.84 12.95 -
flow times
March 2007 March 2008 March 2009
Earnings per share 0.18 0.50 -0.12
Book value 12.34 30.99 30.87
Cash Flow of Aviva Industries
In Rs Crores
March 200812 Months
Net profit before tax -0.01Net cash from operating activities 0.81Net cash (used in )from investing activities
0.06
Net cash ( used in ) from financing activities
-0.26
Net (decrease ) increase in cash & cash equivalent
-0.02
Opening cash & cash equivalent 0.10Closing cash & cash equivalent 0.08
CREDIT RATING
At Aviva we consider it important to keep customers and investors up to date with
developments affecting the Group. In this section we show the Insurer Financial Strength
ratings of our core operating subsidiaries and the ratings of our long and short term debt.
Insurer financial strength
S&P Moody’s AM Best
Rating AA- Aa3 A
Description Very strong Excellent Excellent
Outlook Negative Negative Stable
Debt ratings
S&P Moody'’s AM Best
Senior (guaranteed) A A1 a-
Subordinated A-/BBB+ A3 bbb+
Direct capital instrument BBB+ Baa1 bbb
Commercial paper (guaranteed) A-1+ P-1 not rated
*Ratings as at 5 August 2009
LIMATIONS
The data collection was little bit tough because latest data is not available on the internet.
Finding the data of Insurance sector is very difficult. Problem occurred due to lack of time and facility of internet.
Finding
By this project I found that company position is not that much good right now
because of slowdown in year 2005-06 and that impacted a lot on company’s ratio.
The ratio like Current Ratio, Quick Ratio, Earning par share, Return on Capital
Employed or Shareholder Funds, Operating Profit, Net Profit Margin and Debt-
Equity Ratio are in decline position.
These ratios show that company is not utilizing its fund properly and the working
capital requirement is highly.
By this project I found that the operating expenses are very high due to recovery
period from global slowdown.
I found that if company will focus on its liabilities so they can overcome from the
negative growth.
The cash flow statement shows its working.
The credit rating that the company got in year 2205 was very good. But after that
recession it changed, here credit rating play very important role because almost
60% investors invest their money on the basis of goodwill or credit rating that a
company hold in the market.
Conclusion
As the project is to Analysis of Financial Position & Profitability of Aviva Life Insurance
and the main objective to understand the financial position or condition of company.
After completing the project I know that how ability of management can perform work in
difficult situation. Because during the recession they faced very bad condition but as
India condition will improve they will also improve. As company is trying to reduce its
expenses for earning good profit.
Bibliography
Books
www.google.com
www.moneycontrol.com
http://www.moneycontrol.com/financials/avivaindustries/profit-loss/AI55
http://www.moneycontrol.com/financials/avivaindustries/balance-sheet/AI55
