LIC justifies high embedded value citing amendment in the LIC Act – The New Indian Express

Value rises on split of funds of participatory and non-participatory plans, says chairman
Published: 22nd February 2022 07:41 AM  |   Last Updated: 22nd February 2022 07:41 AM   |  A+A-
Life Insurance Corporation. (File photo)
NEW DELHI:  Amid concerns and doubts over an exorbitant jump in its embedded value (EV), the government-owned Life Insurance Corporation (LIC) has justified the rise in embedded value citing amendment in the LIC Act. The embedded value has been a topic of intense discussion as the PSU insurer prepares itself for the much-awaited listing of 5% equity shares on the bourses.

LIC Chairman MR Kumar explained that the rise was on account of bifurcation of funds of participatory and non-participatory plans. “The 2020-21 amendment in the LIC Act mandates LIC to maintain two funds — one for the participatory policies and another for non-participatory. The embedded value is calculated on a market consistency basis.
So as of March 21, only 10% of the value of the entire mark-to-market equity assets and reserves under non-participatory policies was captured in the embedded value. Post-bifurcation, 100% of the value is captured in the embedded value, and hence the jump in embedded value,” the chairman explained. The embedded value estimated at the end of March 2021 was Rs 95,000 crore, which jumped to Rs 5.54 lakh crore in September 2021.
The amendment in the LIC Act also requires the surplus generated in participatory policies to be distributed in 90:10 ratio in the next three years and 100% in non-participatory policies from this year. A 90:10 ratio means 90% of the profits generated through participatory policies are distributed to  policyholders and the rest 10% among shareholders.
At present, the surplus is distributed in a 95:5 ratio. The insurer has to shift to 90:10 ratio by 2024-25 in case of participatory policies and immediate shift to 100% distribution in case of non-participatory policies. A participatory policy is one where the policyholder gets the share of the profit in the form of bonus and dividends.
Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.
The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.
Wrestling World C’ships: Vinesh Phogat makes it to the repechage round, likely to get shot at Bronze
Violence during ‘Nabanna Chalo’: Four arrested so far, BJP accuses Mamata government of ‘curbing’ democracy in Bengal
What happened in 1984 was not riots, it was genocide: Diljit Dosanjh
Can government explain how territory ‘given’ to China will be retrieved, asks Rahul
Marsh, Starc, Stoinis ruled out of India tour due to injuries 
Investors’ wealth tumbles Rs 2.21 lakh crore in early trade
Copyright – 2022
The Morning Standard | Dinamani | Kannada Prabha | Samakalika Malayalam | Indulgexpress | Edex Live | Cinema Express | Event Xpress
Contact Us | About Us | Careers | Privacy Policy | Search | Terms of Use | Advertise With Us
Home | Nation | World | Cities | Business | Columns | Entertainment | Sport | Magazine | The Sunday Standard


Leave a Comment