Interpreting Key Actuarial Terms and Values

The primary aim is to assess the profitability and financial strength of an Insurance company from its accounts. The key Actuarial terms and values to consider are:

• Underwriting ProfitUnderwriting Profit is the excess of earned premiums by an Insurance company over Incurred claims and expenses. This is how generally profit is measured in Insurance companies. (Revenue A/c)
• Insurance ProfitThere is some investment Income earned by an Insurance company from technical reserves and that is added to underwriting profit to give Insurance Profit. Insurance Profit generally represents the profit acheived through writing Insurance business. (P&L A/c)
• Profit Before TaxAn Insurance company also earns Investment Income from the free reserves it holds. Underwriting profit and such Investment Income add up to give total profit earned by the shareholder's funds which is know as Profit Before Tax. (P&L A/c)
• Retained ProfitAn Insurance company pays out the divident and taxes. The profit remain after paying out such expenses give Retained Profit of the organisation. (P&L A/c)
• Total Shareholder’s Funds (Balance Sheet)

Underwriting Profit

This is the excess of earned premiumsAn earned premium is the premium collected by an insurance company for the portion of a policy that has expired. In other words, the earned premium is what the insured party has paid for a portion of time in which the insurance policy was in effect, but has since expired. by an Insurance company over Incurred claims and expenses. This is how generally profit is measured in Insurance companies.

Insurance Profit

There is some investment Income earned by an Insurance company from technical reserves and that is added to underwriting profitUnderwriting Profit is the excess of earned premiums by an Insurance company over Incurred claims and expenses. This is how generally profit is measured in Insurance companies. to give Insurance ProfitThere is some investment Income earned by an Insurance company from technical reserves and that is added to underwriting profit to give Insurance Profit. Insurance Profit generally represents the profit acheived through writing Insurance business.. Insurance ProfitThere is some investment Income earned by an Insurance company from technical reserves and that is added to underwriting profit to give Insurance Profit. Insurance Profit generally represents the profit acheived through writing Insurance business. generally represents the profit acheived through writing Insurance business.

Profit Before Tax

An Insurance company also earns Investment Income from the free reserves it holds. Underwriting profitUnderwriting Profit is the excess of earned premiums by an Insurance company over Incurred claims and expenses. This is how generally profit is measured in Insurance companies. and such Investment Income add up to give total profit earned by the shareholder’s funds.

Retained Profit

An Insurance company pays out the divident and taxes. The profit remain after paying out such expenses give Retained ProfitAn Insurance company pays out the divident and taxes. The profit remain after paying out such expenses give Retained Profit of the organisation. of the organisation.

Total Shareholders’ Funds

The excess of assets over liabilities for an Insurance Company. It is a measure of financial strength of the Insurance company.

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