Shares of Life Insurance Company of India (LIC) rose about a per cent to Rs 720 in Friday’s opening trade after the insurance giant reported on Thursday an India Embedded Value (IEV) of Rs 5,41,492 crore or Rs 5.41 billion. As of March 31, 2022, compared to Rs 5.39 trillion as of September 2021 and Rs 95,605 crore as of March 31, 2021.

“Rising interest rates have affected the value of bonds, government securities and other fixed income instruments. These factors have been taken into account when calculating LIC’s latest India Embedded Value. From September to March 31, 2022, the loss was around Rs 40,000 crore by market cap. However, the policy sales business has grown, which is why the net increase in EVs was Rs 2,000 crore,” LIC MD Raj Kumar told reporters.

Embedded value (EV) measures the combined value of shareholders’ equity in a life insurance business. It represents the present value of shareholders’ equity in the distributable income of the assets allocated to the enterprise, fully considering the enterprise’s overall risk.

“India Embedded Value (IEV) determination has been completed. The Board adopted the IEV report issued by Milliman Advisors LLP on July 14, 2022,” added Kumar.

Going forward, he said that the IEV would be disclosed every six months, at the end of March and the end of September each year. The company has an embedded value of Rs 5,39,686 crore as of September 30, 2021.

The state-owned insurer said in a release that the IEV as of September 30, September 30, 2021, was significantly higher than the March 2021 IEV due to the LIC’s funding fork following changes to the LIC Act during the FY21-22.

“The change in EV has to be seen as a whole. The market is trending down, and the impact of around Rs 40,000 crore has been taken into account in the calculations. However, other factors have increased, such as the value of a new business (VNB), so it is related to 2022 is different. Compared to the September ratio, the net increase is around Rs 2,000 crore (March 2022),” its executive director (actuarial) K R Ashok said.

The return on embedded value (ROEV) on March 21, 2022, was 11.9%, compared to 36.9% in March 2021. The value of new business or VNB (actual value of sales revenue for a quarter, half year for the year ended March 2022) of insurance companies has increased from Rs 4,167 crore in the year ended March 31, 2021, and Rs 1,583 crore at the end of September increased to Rs 7,619 crore.