LIC’s Embedded Value Determination Process Going On, Says Managing Director

LIC's Embedded Value Determination Process Going On, Says Managing Director

LIC’s embedded value determination process is going on


State-owned Life Insurance Corporation of India (LIC) on Tuesday said the exercise of determining its embedded value (EV) as on March 2022 is a “work in progress” and is likely to be completed by the end of next month.

The embedded value is a measure of the consolidated value of shareholders’ interest in the life insurance business.

It represents the worth of shareholders’ interests in the earnings distributable from the assets allocated to the business after sufficient allowance for the aggregate risks in the business.

LIC’s embedded value was pegged at about Rs 5.4 lakh crore as on September 30, 2021┬áby international actuarial firm Milliman Advisors.

The life insurer’s managing director Raj Kumar said the exercise of determination of Indian embedded value as on March 31, 2022 is under progress and is expected to be completed by June 30, 2022. As soon as the exercise is completed, LIC shall make the required public disclosures of the same.

“It is a long exercise (determination of Indian EV). We are implementing a new IT solution for calculation of 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 data and the output of the new system with the existing system, and have found consistency in the numbers.

It wants to cross-check the data for the period ended March 31, 2022, so as to ensure that the new IT system is perfect, he said.

“We have 285 products which need to be modelled into a new system. We have to check the consistency of the output for each of the products, and it is taking time. We don’t want to rush into any number which can be questioned tomorrow. We want to be absolutely sure and hence we are taking a little more time.

“Going forward, from Q1 (FY23) onwards, it will not be taking so much time and we will be doing it (determining IEV) simultaneously along with the completion of the financial results,” Kumar said.

The state-run insurer will calculate Indian EV on a quarterly basis but has decided to declare the number on a half-yearly basis, a trend followed by the other industry players, he said.

Mr Kumar said at present the corporation’s product mix is dominated by the participating business but going further its driver of growth will be non-participating business.

A participating (par) life insurance policy allows policyholders to participate in the profits of a life insurance company, while a non-participating (non par) plan does not offer any dividend payouts.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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