LIC embedded value goes up despite losses in equity


MUMBAI: LIC has reported an embedded value (EV) of Rs 5,41,492 crore as of March 2022 — an increase of Rs 1,806 crore from Rs 5,39,686 crore as of September 2021. The EV has risen despite taking a Rs 40,000-crore knock because of a fall in equity valuations and bond depreciation. A life insurer’s EV takes into account its net asset value as well as the present value of future profits.
LIC’s market capitalisation, which is derived from the value of its shares, stands at Rs 4,50,434 crore, down by over Rs 1 lakh crore since its listing in May.
The value of new business (VNB) for year ended March 2022 has been determined to be Rs 7,619 crore as compared to Rs 4,167 crore for FY21. The VNB margin for FY22 is 15.1% as compared to VNB margin of 9.9% for FY21. A year ago, the corporation’s EV was Rs 95,605 crore. However, this number is not comparable as the LIC Act was amended to ensure more value for shareholders
The VNB reflects the contribution of new business added to the EV and the VNB margin is obtained by dividing the VNB by the annualised premium equivalent. The VNB margin gives an idea of the profitability of business.
The improvement in VNB takes into account various factors including the change in the composition of insurance products and the growth. During the second half of FY22, LIC managed to increase its margin under group and pension schemes which added to the valuation.
“Going forward we will be declaring our embedded value on a half-yearly basis along with the results and the value of new business will be declared every quarter,” said LIC chairman MR Kumar.
The LIC IPO was priced valuing the corporation at Rs 6 lakh crore which was 1.1 times the EV of Rs 5.39 lakh crore. Since the listing the share price has dipped, and the corporation has a marketcap of Rs 4.5 lakh crore which is 0.8 times the EV.


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