The embedded value of LIC is estimated at Rs 5.4 lakh crore

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Asian life insurance giant, the Life Insurance Company of India on Thursday said its Indian Embedded Value (IEV) as on March 31, 2022 was Rs 541,942 crore.



The embedded value in the case of a life insurance company is the present value of the company’s future profits.

According to LIC officials, the IEV has been set at Rs 541,492 crore (Rs 5,414.9 billion) compared to Rs 95,605 crore (Rs 956 billion) on March 31, 2021 and Rs 539,686 crore (Rs 5,397 billion) on September 30, 2021.

Officials said the stock market volatility has impacted the investment market value of the LIC to the tune of Rs 40,000 crore, which in turn impacted IEV.

According to the officials, the cut in the market value of the investment was from Rs 40,000 crore in both equity and debt segments of the market.

The IEV as of September 30, 2021 was significantly higher than the IEV of March 2021 due to the fund split performed by LIC following changes in the LIC law during the 2021-22 financial year.

The LIC board had approved the split of the single fund into separate participating and non-participating funds on January 8, 2022 and the effect of such split is reflected in the financial data as at March 31, 2022.

The life insurer was engaged Milliman Advisors LLP to arrive at the embedded value.

On Thursday, the LIC board received Milliman’s IEV report.

LIC chairman MR Kumar said the valuation of IEV took some time.

Regarding the LIC’s decision to publish embedded value every six months in March and September, Kumar said this is in line with industry practice.

Further, determining the embedded value of a LIC-sized life insurance company with approximately 28 crore policies is a time-consuming and extensive process, officials added.

The value of new business (VNB) for the year ended March 31, 2022 has been set at Rs 7,619 crore (Rs 76.19 billion) as compared to Rs 4,167 crore (Rs 41.67 billion) for the year ended March 31, 2021 .

Also, for the six-month period ended September 30, 2021, the VNB was at Rs 1,583 crore (Rs 15.83 billion).

The VNB margin for the year ended March 31, 2022 is 15.1 percent compared to 9.9 percent for the year ended March 31, 2021.

Officials said the VNB margin increased due to a change in business mix, as the group business went from 24 percent to 29 percent.

The ROEV (Return on Embedded Value) for March 21, 2022 is 11.9 percent compared to 36.9 percent for March 2021.

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