Insured Additional Int. etc Notes

Insured Additional Int. etc Notes - Chapter 12 Statements...

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Insurer Financial Statements Chapter 12
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Myhr and  Markham, Insurer Operations,  Regulation and Statutory Accounting, 2nd  Edition, 2004, AICPCU Who Looks at Insurer’s Financial  Statements? Company managers need information to plan, monitor and control operations. Earn a profit and maximize firm value. Assess performance for class of business and/or policy type. Reports for middle managers, and others to evaluate divisions, units, offices. Investors need information to assess the financial health of an insurer. Want satisfactory, competitive return on investment. Regulators assess insurer solvency to protect consumers. PHs, producers and risk managers need to know how stable insurers are. Rating services evaluate insurer’s ability to pay claims, grow, remain solvent.
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Myhr and  Markham, Insurer Operations,  Regulation and Statutory Accounting, 2nd  Edition, 2004, AICPCU Key Financial Statements Balance Sheet Income Statement However, components of these statements are different than for other firms. SAP – statutory accounting principles Specific to insurers GAAP – generally accepted accounting principles
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Myhr and  Markham, Insurer Operations,  Regulation and Statutory Accounting, 2nd  Edition, 2004, AICPCU Financial Statement Users Management – to assist in reaching primary goal of firm value maximization and secondary goal of earning a profit. Allows managers to evaluate performance, set new goals and objectives, restructure, or reformulate policies. Also gives specific details about performance of particular lines and classes of business Competitive prices? Cash being distributed effectively to highest performing lines? How are geographic areas performing? Provides specific information regarding the performance of departments, divisions, units, offices, etc… Investors – desire competitive return on investment By examining quarterly and annual reports they can decide if investment is still the “best” option for them. Returns must be competitive with other investments of similar risk and liquidity. Rating services – evaluate financial insurer financial strength for investors and policyholders. Interested in growth, solvency, claims paying ability and return to investors.
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Myhr and  Markham, Insurer Operations,  Regulation and Statutory Accounting, 2nd  Edition, 2004, AICPCU Financial Statement Users Regulators – state insurance regulators are concerned with insurer solvency and require insurers to meet many standards. Minimum start up capital and sufficient capital to continue after start up. Set restrictions on the amount of premiums an insurer can write based on its amount of capital.
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