Question

Insurance Company Financial Statements – fill in the rose shaded blanks 120,000 101,000 Bonds Common Stocks Real Estate Cash & Short-term Investments Mortgage-backed Securities Total Invested Assets 250,000 80,000 20,000 12,000 30,000 Loss Reserves Unearned Premiums Loss-adjustment Expenses Commissions Payable Other Liabilities Total Liabilities 9,000 11,000 255,000 29,600 Premiums Receivable Equipment Other Assets 400 16,000 Paid-in Surplus Unassigned Surplus 18,000 Total Admitted Assets Total Liabilities & Surplus What is the balance sheet equation? 206,000 Premiums Written Premiums Earned for the given Financial Statements... Complete the Balance Sheet Equation (show figures) Investment Income Interest Dividends Rental Income Gain on Sale of Securities Total Investment Income Total Revenue 14,000 2,400 600 What is the Loss Ratio? What is the Expense Ratio? What is the Eyner 18,000 223,000 What is the combined Ratio? Net Losses incurred Loss-Adjusted Expenses Total Losses & Loss Adj Expenses 133,600 14,000 147,600 What is the Investment Income Ratio? Commissions Premium Taxes General Insurance Expenses Total Underwriting Expenses Total Expenses 5,050 41,590 64,640 212,240 Net Income Before Taxes Federal Income Tax (30%) Net Income

Answer 1

Assets Liabilities Bonds Common Stocks Real Estate Cash & Short term Investments Mortgage-backed securities Total Invested Assets Sum of Bonds, Common stocks, real estate, cash & mortgage (250000+80000+20000+ 12000+30000) 250000 80000 20000 12000 30000 392000 Loss Reserves Unearned Premiums Loss - Adjustment Expenses Commisions Payable Other Liabilities Total Liabilities Total Liabilities = 255000 (including Loss - Adjustment Expenses) So, Total Liabiities - All other liabilities except Loass Adjustment Exp = 255000 - 120000 - 101000 - 9000 - 11000 = 14000 120000 101000 14000 9000 11000 255000 29600 Premiums Receivable Equipment Other Assets Total Assets = Total Invested Aseets + Other Assets (392000+29600+400+18000) 400 Surplus Paid - Surplus Unassigned Surplus 16000 169000 18000 Total Liabilities & Surplus = Laibilities +Surplus 440000 = 255000 + 16000 + Unassigned Surplus so, 440000 - 255000 - 16000 = 169000 Total Admitted Assets 440000 Total Liabilities and Surplus 4400001

Revenues Premium Written Premium earned (A) 206000 206000 18000-14000 - 2400 - 600 = 1000 Investment Income Interest Dividends Rental Income Gain on Sale of Securities Total Investment income (B) Total Revenue (A + B) 14000 2400 600 1000 18000 224000 Expenses Net Losses incurred Loss - Adjusted Expemses Total Lossess & Losses Adjusted Expenses (A) 133600 14000 147600 Commissions Premium Taxes General Insurance Expenses Total Underwriting Expenses (B) Total Expenses (A+B) 64640 - 5050 - 41590 = 18000 18000 5050 41590 64640 212240 Net Income Before Taxes (Total Revenue - Total Expenses Less: Federal income Taxes Net Income 11760 3528 8232

Balance Sheet Equation Assets = Liabilities + Equity 440000 = 255000 + 16000 + 169000 440000 = 440000 Loss Ratio = Losses & Losses Adjusted Expenses Net Premium Earned 147600 0.72 206000 Expenses Ratio = Total Underwriting Expenses = Net Premium Earned 0.31 64640 206000 Combine Ratio = Loss Ratio + Expense Ratio 0.72 +0.31 1.03 Investment Income Ratio = Total Investment Income = Net Premium Earned 0.09 18000 206000