LIC share price rises as embedded value slightly increases

As of March 31, 2022, LIC’s Embedded Value was 5.41 trillion dollars.

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In Friday’s opening deals, shares of Life Insurance Corporation of India (LIC) rose about 1% on the BSE to Rs 720 after the insurance giant on Thursday reported the Indian Embedded Value (IEV) at Rs 5,41,492 crore (Rs 5.41 trillion) as of March 31, 2022, compared to Rs 5.39 trillion as of September 2021 and Rs 95,605 crore as of March 31, 2021.

“The rising interest rate has impacted the value of bonds, government securities and other fixed income papers. These have been factored in while calculating the latest Indian embedded value of LIC. The mark-to-market losses have been around 40,000 crore since September till 31 March, 2022. However, the policy sales business has grown and that’s how the net growth in EV is 2,000 crore,” LIC’s Managing Director Raj Kumar told reporters.

A measurement of the aggregate worth of shareholders’ interests in the life insurance industry is the Embedded Value (EV). It shows the current value of shareholders’ interests in the profits that will be distributed from the assets allocated to the company after adequate deductions for all business risks have been made.

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“The Indian Embedded Value (IEV) determination exercise has been completed. The IEV report issued by Milliman Advisors LLP has been adopted by the board on July 14, 2022,” Kumar added.

According to him, the IEV will henceforth be shown six times per year, or at the end of March and September. The corporation’s embedded value as of September 30, 2021, was Rs 5,39,686 crore.

Due to the split of funds that LIC implemented as a result of revisions to the LIC Act during the FY 2021–22, the IEV as of September 30, 2021 was much greater than the IEV as of March 30, 2021, the state-run insurer stated in a release.

“The change in EV has to be looked at in totality. There was a market movement downwards and that impact of around 40,000 crore has been captured in the calculation. However, the other factors increased such as the Value of New Business (VNB) and hence the net growth of around 2,000 crore (in March 2022) compared to September 2022,” its Executive Director (Actuarial) K R Ashok said.

For March 21, 2022, the Return on Embedded Value (ROEV) was 11.9 percent, compared to 36.9% for March 2021. The insurer’s value of new business, or VNB, for the year ended March 2022 increased from Rs 4,167 crore for the year ended March 31, 2021 and Rs 1,583 crore at the end of September to Rs 7,619 crore. This figure represents the actual value of income from sales during a given quarter, half-year, or full year.