LIC’s Integrated Value Determination Process Continues, Says CEO


The process of determining the intrinsic value of LIC continues


India’s state-owned Life Insurance Corporation of India (LIC) said on Tuesday that the exercise to determine its intrinsic value (EV) in March 2022 is a “work in progress” and expected to be completed by the end of next month.

Embedded value is a measure of the consolidated value of shareholder participation in the life insurance industry.

It represents the value of the shareholders’ interests in the distributable profits of the assets attributed to the company after sufficient consideration of the overall risks of the company.

The intrinsic value of LIC has been pegged at around Rs 5.4 lakh crore as of September 30, 2021 by international actuarial firm Milliman Advisors.

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The life insurer’s chief executive, Raj Kumar, said the exercise to determine India’s intrinsic value as of March 31, 2022 is ongoing and expected to be completed by June 30, 2022. As soon as the exercise will be terminated, LIC will make the necessary public disclosures thereof.

“It is a long exercise (determination of Indian EV). We are setting up a new IT solution for Indian intrinsic value calculation and we have to cross-check all the data,” he told reporters.

For the quarter ended September 30, 2021 and December 31, 2021, the company verified all data and results from the new system with the existing system, and found consistency in the numbers.

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He wants to cross-check data for the period ending March 31, 2022, to make sure the new IT system is perfect, he said.

“We have 285 products that need to be modeled in a new system. We need to check the consistency of the output for each of the products, and that takes time. We don’t want to rush into a number that can be questioned. We want to be absolutely sure and therefore we take a little longer.

“Going forward, starting from the first quarter (fiscal year 23), it will not take so long and we will do it (determine the VEI) simultaneously with the completion of the financial results,” Kumar said.

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The state insurer will calculate India’s EV on a quarterly basis but has decided to report the number on a semi-annual basis, a trend followed by other industry players, he said.

Mr. Kumar said that currently the company’s product line is dominated by participating companies, but going further, its engine of growth will be non-participating companies.

A participating (participating) life insurance policy allows policyholders to participate in the profits of a life insurance company, while a non-participating (non-participating) plan offers no dividend payouts. .

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