Shares of Life Insurance Corporation of India (LIC) rose nearly one per cent on BSE. 720 in Friday’s opening deals after the insurer reported the Indian Embedded Value (IEV) on Thursday 5,41,492 crore ( 5.41 trillion) as of March 31, 2022 5.39 trillion by September 2021 and 95,605 crore as of March 31, 2021.
“The rising interest rate has affected the value of bonds, government securities and other fixed income papers. These have been taken into account while computing the latest Indian embedded price of LIC. Mark-to-market losses have been around 40,000 crore from September to March 31, 2022. However, the policy sales business has grown and thus there has been a net increase in EVs. 2,000 crores,” LICManaging Director Raj Kumar told reporters.
Embedded value (EV) is a measure of the consolidated value of shareholders’ interest in the life insurance business. It represents the present value of shareholders’ interests in distributed income from assets allocated to the business after sufficient allowance for the total risks in the business.
“The Indian Embedded Value (IEV) determination exercise is complete. The IEV Report issued by Milliman Advisors LLP has been adopted by the Board on July 14, 2022.”
Going forward, the disclosure of IEVs will be done on a six-monthly basis, i.e. at the end of March and September every year, he said. As of September 30, 2021, the corporation had an embedded value of 5,39,686 crore.
The IEV as of September 30, 2021 was significantly higher than the IEV of March 2021 due to diversion of funds by LIC following changes in the LIC Act during FY 2021-22, the state-run insurer said in a release.
“The change in EVs has to be seen in totality. There was market movement on the downside and that effect was almost 40,000 crores have been deposited in the calculations. However, other factors increased such as the value of new business (VNB) and hence the net growth of approx. 2,000 crore (in March 2022) as compared to September 2022,” its executive director (actuarial) KR Ashok said.
The Return on Embedded Value (ROEV) for March 21, 2022 was 11.9% as compared to 36.9% in March 2021. The value of new business of the insurer or VNB (actual value of proceeds from sales during a certain quarter, half year or full year) for the year ended March 2022 has increased from 7,619 crore 4,167 crore for the year ended March 31, 2021 and 1,583 crore at the end of September.
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