Mumbai: Registered personal life insurance assessments cannot be the basis for LIC assessments, according to former members of Irdai Nilesh Sathe.
With the government appoint a merchant banker for what tends to be the largest government divestment and the biggest IPO, there is LIC assessment speculation.
Many use the registered private sector companies or SBI Life as a proxy for embedded value (EV) and Multiple EV where LIC shares can be offered.
According to Sathe, corporate assessment will be influenced by the level of contribution from a single premium policy on its assets under management (AUM) which will determine the assessment.
According to the number released with LIC, the base of his asset has crossed RS 38 Lakh Crore which is more than 15 times the top personal life company such as HDFC Life or Icici Prudential.
“Considering AUM, if we think the embedded value will be 15-20 times from a private company that will be incorrect because the calculation of embedded value is based on an actuarial calculation, which takes into account the value of future prizes,” Sathe said when speaking at the Indian Institute of India Kolkata recently .
“Because the single premium policy has fewer EV (the present value of future benefits) and reducing profitability, private insurance companies are reluctant to carry out a single premium policy,” he said.
Besides being together by the insurance regulator, Sathe has been the executive director at LIC before.
The distribution of surplus in life funds between policyholders and shareholders is different for LIC compared to private players.
While private companies are permitted to distribute 10% of their surplus to shareholders, LIC has paid only 5% to the government with the rest given to shareholders.
“The Irdai regulation states that the consequences for registering 10% of the surplus can be given to shareholders.” But it is not possible that Suddenly it will reduce the surplus distribution to 90%, “Sathe said.
He suggested that this could be lowered gradually as the size Wise.
Sathe said that to clear the road for the government IPO has increased paid-up capital in the LAC from Rs 100 Crore to Rs 25,000 Crore and has allowed the council to be dissolved where 50% of directors will be independent with specific expertise of the area.
‘Private companies cannot be used as benchmarks to appreciate LIC’
