Mumbai: The embedded value of LIC (EV) surged to nearly Rs 5.4 lakh Crore on September 2021.
It was more than five times higher than the RS 95,605-Crore EV Clock six months earlier in March.
EV is a measure of clean wealth insurance companies and the present value of future profits.
According to the report by Milman’s actuarial company, the reason for the value of a marked surge is a decision by the company to divide the funds of a single policy holder.
It is divided into participating funds and does not participate with shareholders who have 100% interest on those who do not participate.
Analysts said that in the consolidated funds (on March 31), the value of shareholders from non-par assets was set at a fraction of the total funds.
After bifurcation, all returns go to shareholders.
Having stock holder funds is not carved, EV companies will be lower because the interest of shareholders to income will be lower.
Shares of life insurance companies are usually valued at EV multiples.
For example, last year SBI Life (a lifespan promoted PSU) traded on multiples of 2.5 times his EV.
If a similar multiple is applied to LIC, the assessment will be Rs 13.5 lakh Crore.
“While we have obtained a report from independent actuaries, there are significant technical complexities involved in the EV calculation and estimates used in the report can vary by material if the main assumptions are changed or if our experience is different from our assumptions used to calculate our Eva India ., “LIC said in the bidding document.
EV calculations include a number of assumptions relating to mortality & morbidity, persistence & resurrection levels, commissions & expenses, inflation, bonus policy holders, reinsurance, asset values, reference levels, return on investment, taxation, taxation, mandatory ordering and capital requirements.
New shareholder funds increase the value of the embedded PSU almost 5x
