LIC’s embedded pricing process continues
Mumbai:
Life Insurance Corporation of India (LIC) on Tuesday said the exercise to determine its embedded value (EV) by March 2022 is “in progress” and is likely to be completed by the end of next month.
Embodied value 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.
Mr. Kumar said that presently the product mix of the Corporation is dominated by participatory business, but going forward the driver of its growth will be 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.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)