The insurance behemoth, Life Insurance Corporation of India (LIC) has reported a marginal increase in embedded value to Rs. 5.41 lakh crore as of March 2022. The value of new business (VNB) margin for the year ended March 31, 2022 was 15.1 per cent, as compared to 9.9 per cent for the year ended March 31, 2021.
“As on March 31, 2022, the IEV of LIC of India has been determined to be Rs.5,41,492 crore (Rs. 5,414.9 bln) as compared to Rs. 95,605 crore (Rs.956 bln) as on March 31, 2021, and Rs. 5,39,686 crore (Rs. 5,397 bln) on September 30, 2021. The IEV as of September 30, 2021 was significantly higher than the IEV of March 2021 due to the bifurcation of fund that was carried out by LIC, pursuant to changes in the LIC Act during the FY 2021-22,” LIC said in a statement.
As mandated under the amended Section 24 of LIC Act, 1956, the Board of LIC in its meeting held on January 8, 2022 had approved bifurcation of the single fund into separate ‘Par’ and ‘Non-Par’ funds. The effect of such bifurcation has been reflected in its financials, too.
Prior to the amendment to Section 24 of the LIC Act, LIC had only one single consolidated ‘Life Fund’ in respect of its life insurance business. Consequent to the amendments to Section 24 of the Act, the LIC Board was mandated to maintain two separate funds, a participating policyholder’s fund, and a non-participating policyholder’s fund. With this change in the calculation of bonuses for policyholders, there has been a cataclysmic shift in LIC’s valuations. It led to LIC’s embedded value rising to Rs 5.39 lakh crore. Before this bifurcation, LIC’s embedded value was Rs.95,605 crore as of March 2021.
The VNB for year ended March 31, 2022 has been determined to be Rs 7,619 crore (Rs.76.19 bln) as compared to Rs.4,167 crore (Rs.41.67 bln) for the year ended March 31, 2021.
The annualised premium equivalent (APE) for the year ended March 31, 2022 is Rs. 50,390 crore (Rs. 503.90 bln). The APE for year ended March 31, 2021 was Rs.45,588 crore (Rs.455.88 bln) and the APE considered for arriving at VNB for the period ending March 31, 2021 was Rs. 42,170 crore (Rs. 421.70 bln).
Further, for the period ended March 31, 2022, the APE of individual business and group business was Rs.35,572 crore (Rs.3,55.72 bln), and Rs.14,818 crore (Rs.148.18 bln), respectively.
The individual business accounted for 70.59 per cent of APE, and group business accounted for 29.41 per cent of APE. Also, 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.
“The return on embedded value (ROEV) for March 21, 2022 is 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 FY 2021-22,” the statement added.
This announcement came after the market closed for the day. The LIC share closed at Rs. 712.30, down 0.92 per cent at NSE.