LIC's market cap could be Rs 22 lakh crore, ahead of Reliance

NEW DELHI: Life Insurance Corporation (LIC) in its draft red herring prospectus (DRHP) filed with the market regulator said its Indian Embedded Value as of September 30, 2021 stood at Rs 539,686 crore.

The embedded value of a life insurance company is the present value of future profits plus adjusted net asset value. The metric is popularly used to value insurance firms across the world.

In dollar terms this stands at about $72 billion. This is close to what earlier reports suggested. Media reports have projected LIC's market valuation at around four times the embedded value.

That means, the government could be valuing the behemoth at $288 billion or about Rs 22 lakh crore. This will make LIC the largest listed company in India, ahead of Reliance Industries that is valued at Rs 16 lakh crore.

In comparison, IEV of its listed peers HDFC Life is at Rs 29,540 crore, 4.25 times its December quarter Embedded value. Similarly, ICICI Prudential Life Insurance is valued at 2.46 times IEV as of September 2021. SBI Life Insurance is valued at 3.21 times its September 2021 IEV.

The Indian Embedded Value (IEV) was calculated by Milliman, a US-based actuarial and consulting firm, on behalf of the government. Milliman in its report said the IEV surged after LIC board approved bifurcation of the single policyholders’ fund into participating and non-participating funds on September 30, 2021.

“For comparative purposes the IEV (i.e.before the impact of the fund bifurcation) calculated based on the same fund structure (i.e. a single policyholders’ fund) as that reflected in the APS10 Report would be Rs 1,24,767 crore,” it said.

The government is yet to clarify how much money it wishes to earn from selling shares in the insurers. Though it will be selling 31,62,49,885 shares of the company, the DRHP notes.

LIC has a majority share of the life insurance market in India. The government expects the proceeds will help it bridge a deficit gap this fiscal year.