Disinvestment: DIPAM appoints Milliman Advisors as actuary for LIC IPO

New Delhi: The government has selected Milliman Advisors LLP India as the reporting actuary for calculating the embedded value of Life Insurance Corporation (LIC) ahead of its initial public offer (IPO), the Department of Investment and Public Asset Management (DIPAM) said on Thursday. In a tweet, DIPAM Secretary Tuhin Kanta Pandey said, "The government has selected Milliman Advisors LLP India as the Reporting Actuary for the Embedded Value of LIC. Work to start soon." The appointment of the actuary is the first step towards the process of launching the LIC IPO. 

The next step would be to select transaction and legal advisors.

LIC IPO: What does an actuary do?

Actuaries calculate the embedded value and valuation of a company. Embedded value is a common valuation measure used to estimate the consolidated value of shareholders' interest in an insurance company.

The DIPAM had floated a notice for engaging an actuarial firm for LIC IPO in November.

LIC IPO

The government is expected to take about 8-9 months to prepare accounts and do the required legal work before an IPO could be launched because the listing will require amending the LIC Act. Amendments will have to be made to Sections 24, 28 and 37 of the Act. While Section 24 deals with the way the corporation handles its corpus, Section 28 pertains to dividend distribution norms and Section 37 focuses on government guarantee on all its policies. Currently, LIC pays 5 percent of the surplus to the government and the remaining 95 percent goes to its policyholders. This will have to relooked as LIC gets listed and the corporation will have to offer dividend to an external shareholder apart from the government.

ALSO READ: Will LIC IPO be launched this fiscal?

Private insurance companies pay 10 percent of their surplus to shareholders, while the rest goes to policyholders. LIC's equity capital, which currently stands at Rs 100 crore, will also have to be increased in order to sell even a 10 percent stake.

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