A COMPARATIVE STUDY OF ULIPs WITH MUTUAL FUNDS AT

IDBI FEDERAL LIFE INSURANCE CO. LTD

INTRODUCTION TO THE STUDY

• Investment means purchasing of an asset with the intention to gain income from it. • ULIP gives investors the benefits of both insurance and investment under a

single integrated plan.• MF is a trust that pools the savings of investors who share a common

financial goal is known as mutual fund. • The topic helps in understanding the relationship between ULIPs and

Mutual Funds and the working mechanism of both the investment products.• It gives a holistic approach to study the risk involved in both the

investments and thereby the returns that they generate.

ABOUT THE COMPANY

• IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, Federal Bank, and Ageas.• Vision: To be the leading provider of wealth management, protection and

retirement solutions that meets the needs of the customers and adds value to their lives.• Mission: To be transparent in the way we deal with our customers and to

act with integrity. To invest in and build quality human capital in order to achieve our mission.• Commenced operations in 2008, IDBI Federal was able to achieve

breakeven within just 5 years. the Company’s passion for innovation and growth helped it achieve this feat. • Network of 2, 964 branches of IDBI Bank and Federal Bank.

• As on March 31, 2015, the company has issued nearly 7.88 lakh policies with a sum assured of over Rs. 41,856 crore.• Assets under management of 4,087 crore and a robust capital base of

over 800 crores, as on March 31, 2015.• Types of channels are Banca channel, Agency channel, Direct

marketing channel, online channel.• It offers 16 products including 4 ULIP products.

OBJECTIVE OF THE STUDY

• To study the working mechanism of select two ULIP products of IDBI Federal Life Insurance Co. ltd. and two Mutual fund products of HDFC Mutual fund.• To study the performance of select two ULIP products of IDBI Federal

Life Insurance Co Ltd and two mutual fund products of HDFC Mutual fund.• To analyze and examine the risk and return relationship between

Mutual Funds & ULIPs and also comparing with the index.

METHODOLOGY

Primary Data:•Guide and Expert Interviews.

Secondary Data:•Business magazines, Editorials, Business Newspapers, Internet surfing, Library, and Bibliographies, Wealth trends of IDBI Federal and competitors, NAV graph reports, Company website, Journals

Tools and Techniques:•CAGR (Compounded Annual Growth Rate) •IRR (Internal Rate of Return)•Sample variance, Standard deviation, Covariance, Correlation•Holding period returns of Net Asset Values

ANALYSIS AND INTERPRETATION

WORKING MECHANISM:•Working mechanism of select two ULIP products of IDBI Federal and two products of HDFC Mutual fund is studied.•IDBI FEDERAL GROWTH INSURANCE PLAN•IDBI FEDERAL SUVIDHA GROWTH •HDFC EQUITY FUND•HDFC MID-CAP OPPORTUNITIES FUND

PERFORMANCE ANALYSIS:•Benefit illustration of IDBI FEDERAL WEALTHSURANCE GROWTH INSURANCE PLAN•The policy has sum assured of Rs. 5, 00, 000 with PT=15 years, PPT=15 years and annual premium of Rs. 50, 000•The allocation of premium is 70% in equity growth fund and 30% in mid-cap fund.•CAGR@4%= 4.57%, CAGR@8%= 6.87

EQUITY FUND

IDBI Federal Life Insurance Co Ltd

CNX HDFC Mutual fund

11.44% 8.7% 16.04%

MID-CAP FUND

IDBI Federal Life Insurance Co Ltd

CNX HDFC Mutual fund

12.91% 11.05% 21.34%

Actual Performance: 2008-2015

RISK AND RETURN ANALYSIS:•Holding period returns are calculated using CAGR for the NAV values of equity and mid-cap funds of ULIP and mutual funds of IDBI FEDERAL and HDFC mutual fund and compared with CNX index.(Nov 2014- May 2015)

ULIP

EQUITY MID-CAPSample

Variance8.983292 13.17612

Standard Deviation

2.997214 3.629892

Covariance 8.871042 10.41457Correlation 0.987747 0.929756

MUTUAL FUNDS

EQUITY MID CAP

Sample Variance

9.174272 9.774177

Standard Deviation

3.028906 3.126368

Covariance 8.573146 9.451592Correlation 0.94459 0.979685

CONCLUSION AND RECOMMENDATIONS

CONCLUSION:•HDFC Mutual fund’s actual performance is better than IDBI Federal in both equity and mutual funds. •In equity fund ULIP is more reliable thereby less risk and is moving closely with the index. In mid-cap fund mutual fund is more reliable so less risk and is moving closely with the index. •If investors invest money after in-depth study of equity market then they can go for mutual funds.•If you feel that you cannot pay the regular investment and need a relaxation time in your investment plan then ULIP is best.•If the investor seek the importance of life insurance cover with expectations of good returns on the investment made then ULIPs would be a good option.

RECOMMENDATIONS:•People belonging to the middle class segment who are interested in investment but they are not aware of such options, so more awareness should be there, as main target customer are the middle class peoples.•Insurance companies should create more awareness about ULIPs and grow their market share with good funds. •Insurance companies should go for innovating strategies and bring more products and improve the distribution channels as per the area of sales.