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23 Cards in this Set

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Adjusted Liabilities to Liquid Assets Ratio
= (Total liabilities - agents' balances deferred and not yet due) / Liquid Assets Ratio

An acceptable value for this ratio is less than 100 percent. If the ratio is over 100 percent, it could indicate that the insurer could face liquidity problems and an examiner would then focus attention on reserve adequacy, investment mix, and asset valuation; IRIS concept
Equity Multiplier Ratio
Total Assets / Shareholders' equity
Premium to surplus ratio
Net written premiums / Policyholders' surplus

aka capacity ratio
Loss ratio
Incurred losses + loss adjustment expenses / Earned premiums
Investment income ratio
Net investment income / Earned premiums
Insurance leverage equation
= Reserves / Policyholders' surplus

= (Premiums written / Policyholders' surplus) x (Reserves / Premium written)

* Look it up! Doesn't make much sense to me right now
Liquidity ratio
(Cash + Invested assets at market value)
(Unearned premium reserve + loss reserves + LAE reserves)

Greater than or equal to 1 is desirable; measures the extent to which an insurer can meet its obligations as they come due
Cost of debt
(Risk free rate of return + Risk premium) x (1 - tax rate)
Gross profit
Sales (or operating revenue) - Cost of goods sold
Debt-to-assets ratio
Liabilities / Assets
Present value of a perpetuity
(Payment per period) / (Discount rate)

* Look this up!!!
Net income
- Expenses (including depreciation)
+ Gains
- Losses
- Taxes
Payout ratio
The proportion of a company's earnings or net income paid out as dividends to shareholders
Inventory Turnover Ratio
Cost of goods sold / Inventory

INdicates how quickly inventory is sold. A low ratio indicates inventory is not being sold quickly enough.
Return on assets
Net income / Total assets
Bond rate of return
= (Total of the coupon payments + capital gain/loss) / Face value
Net profit margin
= Net income / Sales
Investment Yield Ratio (non-IRIS)
Net investment gain or loss / (Total cash + Invested assets)
Investment Yield Ratio (IRIS)
Net investment income earned for the year / (Average cash + invested assets for the year)

Acceptable value is 3.0 to 6.5 percent
Gross margin (e.g., Gross profit margin)
Gross profit / Sales
Acid-test ratio
(Cash + marketable securities + accounts receivable) / Current liabilities

aka Quick Ratio
Operating income
Gross profit - (Selling, General, & Administrative Expenses)
Reserves to Surplus Ratio
(Unearned premium reserve + Loss & LAE reserves) / Policyholders' surplus