life insurance corporation of India ,LIC) share price fell on Friday, a day after the insurer said its Indian embedded value (IEV) for March has been pegged at Rs 5.41 lakh crore. LIC recorded Indian Embedded Value (IEV) at Rs 5,41,492 crore (Rs 5.41 trillion) as on March 31, 2022, as against Rs 5.39 trillion as of September 2021 and Rs 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 LIC embedded value, The mark-to-market loss from September to March 31, 2022 has been around Rs 40,000 crore. However, there has been an increase in the policy sales business and thus the net growth in EVs is Rs 2,000 crore,” LIC Managing 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 on September 30, 2021, the embedded value of the corporation was Rs 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 the calculation has recorded an impact of around Rs 40,000 crore. However, other factors increased such as the value of New Business (VNB) and hence a net increase of about Rs 2,000 crore (in March 2022) as compared to September 2022,” its executive director (actuarial) KR Ashok said.
LIC’s share price has fallen nearly 25 percent from its IPO 949 priced at Rs. However, analysts at Motilal Oswal believe that the stock may see a possible rise of 17 per cent going forward. The brokerage in its recent note said that LIC has all the levers to maintain its industry leading position and drive growth in highly profitable product segments (mainly security and non-PAR savings/annuities). However, shifting gears for such a vast organization requires better and deliberate execution which has to endure constant rotation at the top management level. “We estimate that LIC will deliver 10 per cent CAGR to NBP in FY 2012-24, while improving margin trajectory and stability in capital markets will improve EV growth,” it said.
The ROEV (return on embedded value) for March 2022 came in at 11.9 per cent as compared to 36.9 per cent in March 2021, LIC clarified, adding that the calculation takes into account the bifurcation effect of splitting of single life funds. Equivalent and non-par fund during the financial year 2021-22. The annual premium equivalent (APE) of LIC for FY22 was fixed at Rs 50,390 crore, the release said. This is higher than the APE FY21, which stood at Rs 45,588 crore, the filing said.
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