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 Profit (Revenue A/c)
- Insurance Profit (P&L A/c)
- Profit Before Tax (P&L A/c)
- Retained Profit (P&L A/c)
- Total Shareholder’s Funds (Balance Sheet)
Underwriting Profit
This 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.
Insurance Profit
There 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.
Profit Before Tax
An 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.
Retained Profit
An Insurance company pays out the divident and taxes. The profit remain after paying out such expenses give Retained Profit of the organisation.
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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