Your reading for this week included a discussion of Policyholders’ Surplus for Life Insurance companies as well as Property and Casualty Insurers. All businesses, for-profit and not-for-profit alike, need to be “in the green.” Your objectives for this week’s tasks are to demonstrate your understanding of how to calculate a policyholders’ surplus (part one) and demonstrate a wider understanding of how important surpluses are for healthcare administration and provision (part two).
Given the values below, determine the policyholders’ surplus for XYZ Insurance company:
- Total invested assets: $50,000,000
- Loss reserves: $40,000,000
- Total liabilities: $70,000,000
- Bonds: $35,000,000
- Unearned premium reserve: $25,000,000
- Total assets: $90,000,000
Discuss how you arrived at your answer.
Discuss the importance of operating “in the green.” Why is having a surplus important to both insurance and healthcare operations? What factors impact a surplus? What conditions are necessary to have and maintain a surplus? Your textbook (and the additional Internet Resources, p. 151) provided insights related to insurance company surpluses. Expand your discussion by researching the role of surpluses in both for-profit and non-profit healthcare operations.
Your paper must be a minimum of 2000 words, not including title or reference pages. Include a minimum of 4 references, 1 from the course textbook and the rest of your choosing. Use proper APA 7th edition citations on the reference page and in text.
This week your textbook explored the links between single financial statements and the overall financial operations of insurance companies. Use what you have learned in Chapter 7 to complete the following problem:
For the past calendar year, a property insurer reported the following financial information for a specific line of insurance:
- Premiums written: $25,000,000
- Expenses incurred: $ 5,000,000
- Incurred losses and loss-adjustment expenses: $14,000,000
- Earned premiums: $20,000,000
For this line of coverage, calculate the:
- Insurer’s loss ratio
- Expense ratio
- Combined ratio