Chapter 03: How Is the Financial Performance of Insurers Measured?

1) 2) 3) 4) 5) 6)

Loss Ratio = Incurred Losses (Including Loss Expenses) / Earned Premiums Expense Ratio = Incurred Underwriting Expenses / Written Premiums Combined Ratio = Loss Ratio + Expense Ratio Investment Income Ratio = Net Investment Income / Earned Premiums Overall Operating Ratio = Combined Ratio Investment Income Ratio Capacity Ratio = Written Premiums / Policy Holders Surplus 1) Sources of Income for an Insurance Company are ____________and ______________ 2) _________________are premiums on policies put into affect or written during a given period. 3) _________________represents the portion of the written premium that is recognized as income only
as time passes and as the insurance company provides the protection promised under the insurance policies.

4) _________________is the portion of written premium that applies to the part of the policy period
that has not occurred.

5) What is Incurred Loss? 6) _______________are the amounts designated by insurance companies to pay claims for losses that
have already occurred but not yet settled.

7) What is Gain or Loss from Operations? 8) What is Net Income Before Tax? 9) What is Net Income After Tax? 10) 11) 12) 13) 14)
What is Net Operating Income or Loss? What is Insurers Surplus? Does Preferred stock come under Admitted Assets? Does Office Equipment come under Admitted Assets? Does Premium Balance due more than 90 Days come under Admitted Assets?

15) 16) 17) 18)

___________Assets are easily convertible to cash at or near propertys market value. ___________Assets are not easily convertible to cash at or near propertys market value. What is Policy Holders Surplus? _______________is a financial obligation owned by the insurer to estimate final settlement

amount on all claims that have occurred but have not yet been settled.

Case 01:
Earned Premiums Written Premiums Incurred Underwriting Expenses Incurred Losses Loss Exp Investment Income Investment Expense Policy Holders Surplus 4000 8000 1000 1500 500 1500 500 6000

Case 02:
A Policy taken on 1st July 2007 and expires on 1st July 2008, whose Written Premium is 24000. What is the Written Premium, Earned Premium, Unearned Premium for 2007 and 2008?

Case 03:
An Inusrance company has the following assets and Liabilites. Calculate the Policy Holders Surplus. Assets:
Cash and Short Term Investments Bonds Preferred Stock Common Stock Mortgages Real Estate 500 1000 1000 2000 500 2000

Premium balance due More than 90 Days 1000

Liabilities:
Loss and Loss Expense Reserve UnEarned Premium Reserve 2000 2000