Embedded value determination expected to be completed by June end: LIC Chairman MR Kumar

LIC Chairperson MR Kumar

The initial public offering of Life Insurance Corporation of India (LIC) on May 17 came against the backdrop of a roughly 8 percent fall in benchmark equity indices in April and May. Rising inflation and the spectre of policy rate hikes had also triggered concerns over corporate profitability and dampened market sentiment.

The stock tanked over 25 percent from the issue price. It hit a fresh record low of Rs 691.20 on the NSE and Rs 691.55 on the BSE in the intraday session on June 15.

Speaking to CNBC-TV18 about the company's underperformance and the many worries raised by investors and analysts, LIC Chairman MR Kumar said that the stock market's downturn is causing fear, which is affecting the stock price.

Talking about the delay in declaring its embedded value (EV) - an important metric that indicates an insurance company’s performance - for the September-March period, Kumar said the delay is due to LIC implementing a new IT solution for the calculation of EV, and that exercise of determining its embedded value as on March 31, 2022, is likely to be completed by the end of June.

Kumar further said the insurance major is recording a robust growth compared with its private peers. Edited excerpts:

LIC IPO has remained in the spotlight even many days after its listing. The reasons are different. The stock is down about 25 percent from its IPO price. The uncertainties have kept investors looking for answers. I want to talk about the stock and the business and how they correlate. The equity markets have been down. Your embedded value is closely linked to the performance of the equity markets. A lot of analysts are concerned. Are these concerns justified according to you?

Not really (the concerns are not justified). I think the market down is itself a concern, and in the background of this, the stock has not done very well. I don't see why there should be concerns around its business, because LIC has been doing strong business in the last couple of months. We are going at the same rate as much as the private industry is. In some metrics, even more than what private businesses are doing. We have started an internal transformation. This will take some time. I am seeing the stock bucking up in the last couple of days. So, I think investors should remain patient and see the good signs that are about to come.

The embedded value calculated as of September was 5.39 lakh crore. Since then, we don't have an update on how the EVs move. But, if we take the Nifty as a benchmark, it has corrected about 12 percent. Is it fair to assume that your embedded value would have also seen a similar sort of correction?

We are still working out on the EV. So, I won't be able to comment on it. But I can say by the end of June, we will have our EV in place.

The markets have seen some sort of correction. How much it will have an impact on the EV? Is it going to be higher than what was last reported? Or, investors could expect a lower EV for the transient phase of the market?

Markets have corrected after March. The EV we are talking about is as of March 31. So people have to make assumptions as to how markets were as of March 31.

EV calculations got delayed. Do you see such frequent delays in calculating EV? Or, do you expect them to be seamless?

They (EV calculations) will be seamless. We had to model our EV based on the 250 products we have. So, it took some time for EV calculations in September. Now, we have all the infrastructure in place. Hope to report EVs along with the financials in the future.