Mumbai: State-owned Life Insurance Corporation of India (LIC) said on Tuesday that the exercise to determine its embedded value by March 2022 is “in progress” and is likely to be completed by the end of next month.
Embedded value (EV) is a measure of the consolidated value of shareholders’ interest in the life insurance business.
It represents the value of shareholders’ interests in distributed income from assets allocated to the business after sufficient allowance for the total risks in the business.
The embedded value of LIC as on September 30, 2021, was estimated to be around Rs 5.4 lakh crore by international actuarial firm Milliman Advisors.
Raj Kumar, managing director of the life insurer, said the determination of the Indian embedded value by March 31, 2022 is in progress and is expected to be completed by June 30, 2022. As soon as the exercise is completed, LIC will make necessary public disclosures of the same.
“It is a long exercise (determination of Indian EV). We are implementing a new IT solution for computing Indian embedded value and we need to cross-check all the data,” he told reporters.
For the quarter ended September 30, 2021 and December 31, 2021, the Corporation checked all the data with the existing system and the output of the new system, and found uniformity in the numbers.
He said it wants to cross-check the data for the period ended March 31, 2022, to ensure that the new IT system is in place.
“We have 285 products that need to be modeled in a new system. We have to check the consistency of the output for each product, and that is taking time. We don’t want to rush any numbers that are questionable. Tomorrow we want to be absolutely sure and that’s why we are taking a little more time.
“Going forward, from Q1 (FY23), it will not take that much time and we will do it (determination of IEV) along with the completion of financial results,” Kumar said.
The state-run insurer will count Indian EVs on a quarterly basis but has decided to declare the numbers on a semi-annual basis, a trend followed by other industry players, he said.
Kumar said that at present the product mix of the corporation is dominated by the participating business, but going forward the driver of its growth will be the non-participating business.
A participating (par) life insurance policy allows policyholders to participate in the profits of a life insurance company, whereas a non-participating (non-par) plan does not offer any dividend payments.
“We have already decided that in the future we will only launch non-equal products. With the product mix shifting towards the non-equal side at a greater pace than the equal side in the future, the value of the new business will be created. That’s the strategy we’re adopting.”
The biggest driver of growth for the life insurer will be the bancassurance channel. It has 72 tie-ups with various banks, giving it 60,000 outlets to sell its products. Kumar said that in the next 5 years, it plans to activate every outlet available to sell the products.
On Monday, LIC announced its first quarterly results after listing on the stock exchanges earlier this month.
On a standalone basis, the insurer reported an 18 per cent decline in its net profit at Rs 2,371.55 crore for the quarter ended March 2022 as against Rs 2,893.48 crore in the year-ago period.
On a consolidated basis, profit after tax declined 17 per cent to Rs 2,409 crore for the fourth quarter ended March 2022 from Rs 2,917 crore in the same quarter a year ago.
“Earlier profit was declared only at the end of the year. Hence quarterly numbers are not comparable… Q4 numbers this year (FY22) are not comparable with Q4 of last year (FY21) as it was for the full year (FY21). Year 21), Kumar said comparable data points would be available from September 2022.
For the full financial year 2021-22, LIC reported a 38 per cent growth in its consolidated profit at Rs 4,124.70 crore as against Rs 2,974.13 crore in the previous financial year.
Its income from premium for the first year increased to Rs 14,663.19 crore as against Rs 11,053.34 crore in the same quarter of the previous fiscal.
Income from renewal premium grew 5.37 per cent to Rs 71,472.74 crore, while income from single premium grew 33.70 per cent to Rs 58,250.91 crore during the quarter.
Embedded value (EV) is a measure of the consolidated value of shareholders’ interest in the life insurance business.
It represents the value of shareholders’ interests in distributed income from assets allocated to the business after sufficient allowance for the total risks in the business.
The embedded value of LIC as on September 30, 2021, was estimated to be around Rs 5.4 lakh crore by international actuarial firm Milliman Advisors.
Raj Kumar, managing director of the life insurer, said the determination of the Indian embedded value by March 31, 2022 is in progress and is expected to be completed by June 30, 2022. As soon as the exercise is completed, LIC will make necessary public disclosures of the same.
“It is a long exercise (determination of Indian EV). We are implementing a new IT solution for computing Indian embedded value and we need to cross-check all the data,” he told reporters.
For the quarter ended September 30, 2021 and December 31, 2021, the Corporation checked all the data with the existing system and the output of the new system, and found uniformity in the numbers.
He said it wants to cross-check the data for the period ended March 31, 2022, to ensure that the new IT system is in place.
“We have 285 products that need to be modeled in a new system. We have to check the consistency of the output for each product, and that is taking time. We don’t want to rush any numbers that are questionable. Tomorrow we want to be absolutely sure and that’s why we are taking a little more time.
“Going forward, from Q1 (FY23), it will not take that much time and we will do it (determination of IEV) along with the completion of financial results,” Kumar said.
The state-run insurer will count Indian EVs on a quarterly basis but has decided to declare the numbers on a semi-annual basis, a trend followed by other industry players, he said.
Kumar said that at present the product mix of the corporation is dominated by the participating business, but going forward the driver of its growth will be the non-participating business.
A participating (par) life insurance policy allows policyholders to participate in the profits of a life insurance company, whereas a non-participating (non-par) plan does not offer any dividend payments.
“We have already decided that in the future we will only launch non-equal products. With the product mix shifting towards the non-equal side at a greater pace than the equal side in the future, the value of the new business will be created. That’s the strategy we’re adopting.”
The biggest driver of growth for the life insurer will be the bancassurance channel. It has 72 tie-ups with various banks, giving it 60,000 outlets to sell its products. Kumar said that in the next 5 years, it plans to activate every outlet available to sell the products.
On Monday, LIC announced its first quarterly results after listing on the stock exchanges earlier this month.
On a standalone basis, the insurer reported an 18 per cent decline in its net profit at Rs 2,371.55 crore for the quarter ended March 2022 as against Rs 2,893.48 crore in the year-ago period.
On a consolidated basis, profit after tax declined 17 per cent to Rs 2,409 crore for the fourth quarter ended March 2022 from Rs 2,917 crore in the same quarter a year ago.
“Earlier profit was declared only at the end of the year. Hence quarterly numbers are not comparable… Q4 numbers this year (FY22) are not comparable with Q4 of last year (FY21) as it was for the full year (FY21). Year 21), Kumar said comparable data points would be available from September 2022.
For the full financial year 2021-22, LIC reported a 38 per cent growth in its consolidated profit at Rs 4,124.70 crore as against Rs 2,974.13 crore in the previous financial year.
Its income from premium for the first year increased to Rs 14,663.19 crore as against Rs 11,053.34 crore in the same quarter of the previous fiscal.
Income from renewal premium grew 5.37 per cent to Rs 71,472.74 crore, while income from single premium grew 33.70 per cent to Rs 58,250.91 crore during the quarter.