LIC embedded value soars to $72b in just six months

The jump in value was attributed to splitting of policyholders funds.

The Life Insurance Corporation (LIC) of India saw its embedded value (EV) soar to $72b as of 30 September 2021, almost five times higher than $12.74b in 31 March of the same year.

According to Seattle-headquartered international actuarial and consulting firm Milliman, the increase in EV was due to the shareholder’s interest in the non-participating funds increasing to 100%, following the decision of the board of directors of the Corporation on 8 January 2022 for the bifurcation of the single policyholders’ fund into participating and non-participating funds on 30 September 2021. 

“This reflects the assets backing the statutory liabilities, provisions for solvency margin and non-participating global reserves residing in the non-participating funds,” Milliman observed.

Also read: India state-run LIC files $8b IPO papers

LIC, this recalibration will bring them in line with private sector rivals however it may also reduce the attractiveness of its participating products which could have an adverse effect on their business, financial condition, results of operations, and cash flows.

Intense competition

In its draft prospectus, the government-backed insurer admitted that there is no assurance that it will not lose further share of the life insurance market in India, given the competitive conditions of the market.

“We face significant competition in India and overseas in respect of our life insurance business and other sectors or industries in which we operate,” LIC said in its draft.

LIC’s initial public offering is expected to be completed in March, with the government selling of 5% of its share, potentially raising around $8b.

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