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Life Insurance Corporation of India (LIC) on Thursday reported the Indian Embedded Value (IEV) at Rs 5.41 trillion as of March 31, 2022, as compared to Rs 95,605 crore as of March 31, 2021.
The Embedded Value (EV) is a measure of the consolidated value of shareholders' interest in the life insurance business.
It represents the present value of shareholders' interests in the earnings distributable from the assets allocated to the business after sufficient allowance for the aggregate risks in the business.
“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," LIC's Managing Director Raj Kumar told reporters.
Going forward, the IEV will be disclosed on six monthly basis, that is, at the end of March and September, every year, he said.
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As of September 30, 2021, the corporation's embedded value stood at Rs 5.39 trillion.
The IEV as of September 30, 2021 was significantly higher than the IEV of March 2021 due to the bifurcation of funds that was carried out by LIC following changes in the LIC Act during the FY 2021-22, the state-run insurer said 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 Rs 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 Rs 2,000 crore (in March 2022) compared to September 2022,” its Executive Director (Actuarial) K R Ashok said.
In January this year, the board of LIC had approved bifurcation of the single fund into separate Par (participating) and Non-Par (non-participating) funds and the effect of such bifurcation has been reflected in the financials of the year ended March 31, 2022.
The VNB for the year ended March 2022 has been determined to be Rs 7,619 crore, as compared to Rs 4,167 crore for the year ended March 2021. Also, the VNB for the six-month period ended September 30, 2021 was Rs 1,583 crore, the release said.
For the year ended March 31, 2022, the VNB margin was 15.1 per cent as compared to VNB margin of 9.9 per cent for the year ended March 31, 2021.
The Annualised Premium Equivalent (APE) for the year ended March 31, 2022 is Rs 50,390 crore, as against Rs 45,588 crore as March 31, 2021.
The APE considered for arriving at VNB for the period ended March 31, 2021 was Rs 42,170 crore.
Further, for the year ended March 31, 2022, the APE of individual business and group business was Rs 35,572 crore and Rs 14,818 crore respectively, the release said.
Therefore, the individual business accounted for 70.59 per cent of APE and group business accounted for 29.41 per cent.
Within the individual business, the par business share on APE basis was 92.88 per cent, while the remaining 7.12 per cent was from the non-par 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.
The Return on embedded value (ROEV) for March 21, 2022 stood at 11.9 per cent as compared to 36.9 per cent for March 2021.
“It is clarified that these calculations take into account the bifurcation impact of the split of single life fund into par and non-par fund during the FY2021-22,” the insurer said.
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