Thursday, May 19 2022
Financial Risk

Lic’S Embedded Value Likely At $150 Billion, Says Report

Pauline Kunkle November 22, 2021


The embedded value of the state-run Life Insurance Corporation of India (LIC) was arrived at $150 billion in an actuarial valuation exercise, according to a report. The embedded value — including the current value of future profits with the net value of assets — is the key financial gauge for insurers. Progress has been slow with the calculation of LIC’s embedded value, taking almost eight months so far.

The recent analysis by the actuary — a business professional who measures, manages, and mitigates financial risk and uncertainty for its clients — also pointed out that the size of LIC and its restructuring is likely to make investors wary of its growth prospects, Mint reported.

This comes days ahead of India’s largest insurer is scheduled to rollout its initial public offering (IPO).

In an effort to boost confidence, LIC is looking for anchor investors. According to the report, the government-owned company has already initiated talks with several foreign investors, including pension funds, to join as anchor investors in its IPO. However, the amount LIC is looking to raise from anchor investors has not been revealed.
Anchor investors are institutional investors invited to buy the shares of a company before its IPO rollout to improve the popularity of the issue. However, these investors are not allowed to sell their shares until 30 days after the listing, as per the Securities Exchange Board of India (Sebi) norms. The concept was launched by Sebi in 2009.

Through the LIC IPO, the government is looking to raise between Rs 40,000 crore ($5.4 billion) and Rs 1 trillion. The Centre has selected 10 banks, including Kotak Mahindra Bank Ltd, Goldman Sachs Group Inc., JPMorgan Chase & Company and ICICI Securities Ltd, to arrange the sale.

LIC controls two-third of the Indian insurance market. The company has over 300 million policies and more than 1.2 million agents.

First Published:  IST


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