The Chief Financial Officer for Extra Cautious Insurance Company, has engaged your assistance in pulling together the draft financial statement for the calendar year that just ended, and performing some risk analysis based on that statement.

She provides you with the following partial information:

Cash Flows Full Year 2023:

Premiums	150,000
Claims	90,000
Commissions	4,500
Acquisition Expenses	7,500
Other Expenses	500

Balance Sheet (Assets, Liabilities and Capital) for 2022 and 2023:

	Actual YE 2022	Estimated YE 2023
Cash & Invested Assets	135,000	???
Deferred & Uncollected Premium	5,600	6,200
Investment Income Due and Accrued	900	700
Total Assets	141,500	???
Claim Reserves	90,000	89,000
Unearned Premium Reserve	5,000	4,700
Unearned Investment Income	325	300
Commissions Payable	300	350
Total Liabilities	95,625	94,350

In the questions that follow we will develop the incurred income statement and complete the balance sheeton a Statutory basis.

Questions

1. Calculate the following income statement items for 2023:
   2. (3 points) Earned premium
   4. (3 Points) Incurred claims
   6. (3 points) Total incurred expenses (including commissions)

1. Assume that cash investment income is not yet available in the system, and we have to estimate it for this analysis. The estimate is going to equal 7% earned rate applied to average invested assets, where average invested assets is equal to starting invested assets plus one half of the cash flows (that is, we assume cash flows provided above are invested for half a year on average).
   2. (4 points) Calculate 2023 cash investment income.
   4. (4 points) Use this calculation and the balance sheet investment income items to estimate the incurred investment income.

(Note: this example assumes zero investment expense. If there were investment expense, the "Net Investment Income" would be calculated net of this expense.)

1. Use the results of the prior exercises and an effective federal income tax rate of 21% to calculate the estimate 2023:
   2. (3 points) Pre-tax underwriting profit
   4. (3 points) Total pre-tax profit
   6. (3 points) Total after-tax profit.

1. Assuming Extra-Cautious Insurance retains all after-tax profit, calculate the Company's year-end 2023
   1. (4 points) Capital and surplus

(4 points) Cash & Invested assets