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LIC’s Embedded Value Steady At Rs 5.41 Lakh Crore Despite Market Volatility


Life Insurance Corp.’s embedded value held steady even as volatility in the equity market was offset by improving business.

The insurer’s embedded value stood at Rs 5.41 lakh crore as on March 31, 2022, according to its filing. That compares to Rs 5.39 lakh crore as on Sept. 30, 2021 and Rs 95,605 crore in March 2021.

LIC, which discloses EV on a half-yearly basis, had deferred the disclosure when it announced its results for the fourth quarter ended March in May.

The embedded value indicates the sum of present value of future profits and adjusted net asset value. It similar to book value but adjusted for future provisions and cash flows. Equity and debt impact the metric.

“The embedded value suffered a loss Rs 40,000 crore due to volatility in equity and debt markets” in the second half of the year owing to geopolitical tensions, changes in interest rates and withdrawal of foreign institutional investors, the company’s management said in a press meet. “A 10% fall in the equity markets impacts the embedded value by 6.5%, while bonds have a small 0.4-0.5% impact.”

Yet, the embedded value improved marginally. Factors like growth in value of new business, better mortality, persistency and changes in some other assumptions cushioned the EV, it said.

Other Key Metrics

  • The value of new business expanded from Rs 4,617 crore in March 2021 to Rs 7,619 crore in March 2022.

  • The VNB margins expanded to 15.1% from 9.3% in H1FY22 and 9.9% in FY21.

  • The return on embedded value stood at 11.9% as against 36.9% in March last year. The insurer attributed the decline to a larger EV base.





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