This website uses cookies to ensure you have the best experience. Learn more

Analysis Of Insurance Financial Statements

1806 words - 7 pages

The Underwriting Expense Ratio measures efficiency by comparing the amount of losses incurred while making a sale and issuing a policy to the amount of premiums for all policies sold in a certain accounting period. It calculates the percentage of written premiums that go toward paying expenses associated with a new policy before any claims are paid out. The smaller the numerator (underwriting expenses), the lower the ratio. Therefore, by minimizing underwriting expenses, a company can improve efficiency. Of the 4 companies I researched, Dakota Truck Underwriters were the most efficient in this area with a ratio of 19.5%. Drivers Insurance Company had the largest Underwriting Expense Ratio, despite having the lowest amount of underwriting expenses relative to the other 4 companies. However, their ratio was the largest because they had the least amount of premiums written. While calculating all 4 ratios, I found that the Daily Underwriters of America and Discover Property & Casualty Insurance Company did not have any Total Other Income. Perhaps this is why their ratios were larger than Dakota Truck Underwriters.The Loss Adjustment Expense Ratio also measures efficiency, but does so by calculating the percentage of earned premiums that are used to pay claim costs other than the claim itself. These consist of attorney's fees, acquiring expert witnesses for trial purposes, hiring a claims department, etc. Much like the Underwriting Expense Ratio, it is best to minimize this ratio by minimizing the amount of adjustment costs and maximizing the amount of earned premiums through sales. In my report, the Daily Underwriters of America did the best job at this task. And surprisingly, Dakota Truck Underwriters had the highest ratio. Each of the other 4 companies had a lower LAE Ratio compared to their Underwriting Expense Ratio. Dakota Truck Underwriters' was 3.6% higher. Perhaps because they concentrate on reducing Underwriting Expenses, they are not so concerned with minimizing LAE. This would be an area they need to work on in order to increase their efficiency.Comparing Loss Ratios (Pure Loss and Losses including LAE) These ratios measure the percentage of premiums that go toward paying claims (and adjusting them if LAE is included). They are related directly to the idea of minimizing the cost of risk. A firm wants to offset unexpected increases in losses with cash inflows, hedging arrangements, and other risk transfers. By doing so, they reduce cash outflows and increase the value of their firm. The lower the amount of losses, the smaller percentage of cash inflows from premiums must be used to pay them. By carefully planning for expected and unexpected losses, a firm can free up premium funds for use in other financial operations and increased profitability. In my report, Discover Company had the highest amount of incurred losses (not including LAE), but their Pure Loss Ratio was second highest to Drivers Company. This is because Drivers...

Find Another Essay On Analysis of Insurance Financial Statements

TATA MOTORS : FINANCIAL STATEMENTS ANALYSIS

7041 words - 28 pages influencing the company. All the various financial ratios have been calculated and analyzed in length to appreciate their impact on company's performance. DuPont analysis has been done to check the credibility of company as per shareholders, financial analysts and other mutual funds.The financial statements of last three years have been identified, studied and interpreted in light of company's performance. Capital Structure of the company, critical

ratio analysis of financial statements - UCL/finance - research paper

1157 words - 5 pages Walmart Ratio Analysis Ratio analysis enables scale to be determined and for comparison against similar firms within a given time frame. It is also done drawing references from a company’s financial statements. Walmart is a multinational retailing company whose mission is to be one of the top global producers as well as a provider of these services. It is important that both internal and external users have adequate knowledge of a company

The Purpose of Financial Statements

1835 words - 7 pages The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are

Review of Financial Statements Paper

1330 words - 5 pages I have selected two of America's most established and well known companies ever, Coca-Cola and Pepsi, on which to conduct a review of financial statements. These two companies combined have been in business 230 years. Coca-Cola and Pepsi have come to dominate the global market with their products. They both have production plants in every major country on this planet. This paper will provide a brief overview of each company, which includes when

Review of Financial Statements Paper

1855 words - 7 pages The annual reports of Wal-Mart and Target are provided free of charge via Walmart.com and Target.com. Upon inspection, the Wal-Mart and Target reports include meaningful financial statements included in their annual reports.Product or ServicesBoth Target and Wal-Mart sell roughly the same types of products and services. Wal-Mart has a few extra services or products that Target may not have but they are pretty much equals in their industries

analysis of financial statements of LVMH in comparison to PPR and richmont

4108 words - 16 pages and the profit of €2.026 billion. Considering the current recession in the world economy these numbers should be carried out by a very strong managerial team which was our main persuasion for choosing LVMH to evaluate its yearly financial reports. This project aims to analyze the LVMH financial report as a single company and in comparison to the year before (2007) and benchmark it with Pinault-Printemps-Redoute (PRR), the main same size

Accounting: The Four Types of Financial Statements

752 words - 4 pages Accounting Wizard Lorenzo Crawford ACC100 Ms. Galarza 5/28/2014   When it comes to Accounting, there are four types of financial statements. These statements are critical when managing a business. The four types of financial statements are Statement of Financial Position, Income Statement, Statement of Changes in Equity, and Cash Flow Statement. Statement of Financial Position is the company’s financial position of an entity at any given

Financial Statements Paper Principles of Accounting

644 words - 3 pages IntroductionThis paper will define the purpose of accounting and identify the four basic financial statements. These financial statements include, the income statement, retained earnings statement, balance sheet and statement of cash flows. This paper will further explain how these financial statements are related with each other and why they are useful to business managers, investors, creditors, and employees.AccountingThe purpose of accounting

"Four Basic Financial Statements". Provide an explanation of the four basic financial statements used in business

913 words - 4 pages an external user would have to sift through to get a general idea of a company's financial health, companies typically produce four different types of basic financial statements.The four basic financial statements are:1) Income Statement - "Presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time." (Weygandt, Kimmel and Kieso, 2008. pg.21). This is probably the simplest of the four

Preparation of Financial Statements and Prevention of Fraud

1843 words - 7 pages PREPARATION OF FINANCIAL STATEMENTS &PREVENTION OF FRAUDThe recent years have seen an increased demand for the release of transparent and integral financial information by the corporate sector. Following decades of minimally regulated growth and non-existent government oversight large organizations now encompass a significant number of stakeholders. The exponentially increased cash flows and profit margins warrant sophisticated accounting

Cipla LimitedAndSun Pharmaceuticals LimitedA comparative study of Financial Statements

3282 words - 13 pages for the company and predict the future performance and stock prices of the company. To achieve this we have analyzed Revenue Trends, Profitability, Liquidity, Debts, Stocks, Cash Flows and provided a summary at the end of the report.The scope of the report is limited to our understanding of the Financial Statements based on the current course. The report has to be seen in its completeness along with the excel worksheet containing the past five

Similar Essays

Analysis Of Financial Statements

2370 words - 9 pages Analysis of Financial PAGE \* MERGEFORMAT 1 Running head: ANALYSIS OF FINANCIAL STATEMENTSAnalysis of Financial StatementsYolanda Cannon, Tiffany Nicole Jackson & Karmisha WomackUniversity of PhoenixFinancial Analysis for Managers IFIN/324Robert Fencl10 May 2007Analysis of Financial StatementsFinancial statements or reports are records of a company's financial transactions. They determine the profitability of a company's finances in the

Analysis Of Financial Statements Simulation

979 words - 4 pages Analysis of Financial PAGE \* MERGEFORMAT 1 Running head: ANALYSIS OF FINANCIAL STATEMENTS SIMULATIONAnalysis of Financial Statements SimulationUniversity of PhoenixAnalysis of Financial Statements SimulationThis paper will answer two questions concerning the Analysis of Financial Statements Simulation. The first answers how the manager of Panorama should decide the relative importance of the five categories of financial ratios when assessing

Review Of Financial Statements

1840 words - 7 pages Financial statements are essential accounting tools which include balance sheets, cash flow statements, and income statements that provide information on a company's past and present financial history. Information on financial statements can be used by any number of public and private entities to determine if an organization's financial status is healthy. Burger King and McDonald's are two organizations that use financial statements in

Financial Statements Analysis, Landry's Restaurants

1088 words - 4 pages March 20, 2009, from http://www.investopedia.com/dictionary/default.aspKimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2007). Financial accounting: Tools for business decision making (4th ed.). Hoboken, NJ: John Wiley & Sons.Phillips, F., Libby, R. & Libby, P. A. (2006). Fundamentals of financial accounting. Boston: McGraw-Hill Irwininstructor comment: An excellent detailed analysis!!