Source: https://www.thehindubusinessline.com/markets/stock-markets/lic-ipo-govt-appoints-milliman-advisors-to-find-embedded-value-of-the-insurer/article33463908.ece
LIC IPO: Govt appoints Milliman Advisors to determine 'embedded value' of the insurer
An Indian Embedded Value is a measure of the consolidated value of shareholders’ interest in the life insurance business.
The Government on Thursday took one more step towards Initial Public Offer (IPO) of Life Insurance Corporation of India (LIC) by appointing Reporting Actuary.
“Government has selected Milliman Advisors LLP India as the Reporting Actuary for the Embedded Value of LIC,” Secretary of Department of Investment and Public Asset Management (DIPAM), Tuhin K Pandey said in a tweet. Further, he mentioned that work to start soon. Apart from Milliman, EY Actuarial Services LLP and Willis Towers Watson Actuarial Advisory LLP were in the fray.
According to the Indian subsidiary of US-headquartered Milliman, the firm claims to be among the world’s largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance, financial services, and employee benefits. Founded in 1947, it is an independent firm with offices in major cities around the globe.
DIPAM is a department under the Finance Ministry and is responsible for disinvestments and working together with the Financial Services Department for selling part of Government’s share in LIC.
Indian Embedded Value
Earlier, DIPAM floated a Request for Proposal (RFP) to appoint an actuary for determining the Indian Embedded Value (IEV) for LIC. The IEV is a measure of the consolidated value of shareholders’ interest in the life insurance business within the meaning of the Insurance Act, 1938, and applicable IRDAI regulations. It is one of the pre-conditions of the initial public offer (IPO) for LIC, and it needs to be determined by an independent actuary.
IRDAI regulations require an applicant company to file the ‘Embedded Value’ before an IPO. The valuation report needs to be prepared by an independent actuary and peer-reviewed by another professional.
In her FY 2020-21 Budget speech, Finance Minister Nirmala Sitharaman proposed to sell a part of its holding in LICI by way of Initial Public Offer (IPO). This IPO is critical to meet the ₹2.10 lakh crore proceed. Out of this target ₹90,000 crore is to be collected through selling stakes in LIC and IDBI Bank while ₹1.10 lakh crore is to be mobilised through stake sales, buyback etc. of Central Public Sector Enterprises (CPSEs).
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