An executive said that Life Insurance Company of India (LIC) had taken a Rs 40,000 crore hit to its valuation as stocks continue to fall and rising interest rates hit yields on its debt investments.

“The fall in the stock market has affected the valuation of equity investments held by LIC,” an executive director of the country’s largest life insurer said on a conference call hosted by Chairman MR Kumar on Thursday.

“Rising interest rates have affected the value of bonds, government securities and other fixed income instruments. These factors have been considered when calculating LIC’s latest India Embedded Value. From September to March 31, 2022, the loss is about Rs 40,000 crore by market cap. However, the policy sales business has grown, which is why the net increase of Rs 2,000 crore in embedded value,” he said. The insurer’s board met earlier on the same day.

The insurer said that for every 10% drop in the stock market, LIC’s embedded value fell by 6.5%.

From the end of September to the end of March, the Indian stock market fell about 1% in net value while hitting multiple lows, causing a loss of Rs 40,000 crore in LIC’s market value.

But, between the end of March and the end of June, the equity market fell even more sharply, meaning that the embedded value of LIC could take a worse hit and fall further to Rs 5.41 trillion (as of March 31, 2022), announced by LIC on Thursday.

The market fell 9.5% in the June quarter. The Sensex fell from 59,126 on March 31 to 53,019 on June 30, down at least 5,594 points or 9.5%.

LIC said that as of September 30, 2021, LIC’s electric vehicles had been identified at Rs 5.41 trillion, compared to Rs 5.39 trillion as of September 30, 2021.

Value of new business or VNB (actual value of sales revenue for a specific quarter, half year or full year) of insurance companies increased from Rs 4,167 crore for the year ended March 31, 2021, to Rs 7,619 crore for the year ended March 31, 2021, Rs 1,583 crore at the end of September.