LIC’s valuation reduced by ₹40,000 crore due to the fall in the stock market

“The fall in the equity market has impacted the valuation of equity investment holdings by LIC,” executive director of the country’s largest life insurer said in a conference call organized by chairman MR Kumar on Thursday.

“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 the net growth in EVs 2,000 crore,” he said. The insurer’s board meeting was held earlier in the day.

The insurer said that for every 10% fall in the equity market, the embedded value of LIC decreases by 6.5%.

Between the end of September and the end of March, the Indian equity market declined nearly 1% on a net basis, while hitting lower levels on several occasions, leading to mark-to-market losses. 40,000 crore for LIC.

But, between the end of March and the end of June, the equity market declined even more sharply, which essentially means that the embedded value of LIC could get worse and worse. 5.41 trillion (as of March 31, 2022), which was announced by LIC on Thursday.

The market has declined 9.5 per cent in the June quarter. The Sensex has fallen at least 5,594 points or 9.5% from 59,126 points on March 31 to 53,019 points on June 30.

LIC’s EVs are scheduled for the end of March 5.41 trillion as compared to 5.39 trillion as of September 30, 2021, LIC said.

The value of new business or VNB (actual value of proceeds from sales during a certain quarter, half year or full year) of the insurer 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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