Life Insurance Corp. of India (LIC) has suffered a ₹40,000 crore blow on its valuation due to the extensive drop in equity markets and increasing interest rates encompassing results from its debt investment, the main executive announced.
“The equity market decline has affected the valuation of equity investment holdings by LIC,” an executive director of the country’s enormous life insurer told at a conference call hosted by chairman M.R. Kumar on Thursday.
“The surging interest rate has affected the value of bonds, government securities and other steady income papers. These have been factored in while computing the latest Indian embedded value of LIC. The mark-to-market beatings have been around ₹40,000 crores from September till 31 March 2022. Nonetheless, the policy sales business has risen and that’s how the net growth in EV is ₹2,000 crore,” he announced. The insurer’s board convened before in the day.
For every 10% fall in the equity market, LIC’s embedded value reduces by 6.5%, announced the insurer. Between September end and March end, the Indian equity market was below by about 1% on a net basis, slamming lows on various occasions, which directed to the mark-to-market loss of ₹40,000 crores for LIC.
But, between March end and June end, the equity market dropped even more snappily, which nearly means LIC’s embedded value may take a horrible beating and erode further from ₹5.41 trillion (as on 31 March 2022), which was declared by LIC on Thursday.
The market declined by 9.5% in the June quarter. The Sensex has lost at least 5,594 points or 9.5% from 59,126 points on 31 March to 53,019 points on 30 June.
At the end of March, the EV of LIC has been assumed to be ₹5.41 trillion as correlated to ₹5.39 trillion as on 30 September 2021, told LIC.
The insurer’s significance of a new business or VNB (the actual value of income from the sales during a certain quarter, half year or full year) for the year ended March 2022 has increased to ₹7,619 crores from ₹4,167 crores for the year ended March 31, 2021, and ₹1,583 crores at the end September.