A major French insurer is in a position to take over an Irish-based insurance company called FarmInsure Ltd. FarmInsure has a particular focus on agricultural insurance which may complement the French insurer's expertise in this sector. Using some preliminary information on FarmInsure, they can consider whether to continue their investigation into the financial position and examine whether the Irish insurer is a suitable take-over prospect.
1. With total assets of €242 million and total liabilities of €275 million, what is FarmInsure's policyholders' surplus?
2. Last year, FarmInsure had earned premiums of €77.5 million, but total revenues were €82.5 million. Explain how this was possible. Why might this be the case?
3. FarmInsure Plus is the company's main insurance product and it is sold to 35,000 farmers in Ireland. FarmInsure has incurred losses and loss- adjustment expenses of €1,750,000 for this product over a 1-year period. What is the pure premium for FarmInsure Plus?
4. If the gross rate for FarmInsure Plus is €78.12, what is the expense ratio?
5. Although FarmInsure made a net underwriting loss last year, it paid €1.25 million in taxes. Explain why this was the case.