2. Excerpts from the profit & loss statement of an insurance company

Revenues

Premiums Written 200,900,000 Premiums earned (200,900,000 1,000,000)

Investment Income

Interest 10,000,000

Dividends 2000,000

Rental Income 600,000

Gain on Sale of Securities 1,000,000

Expenses

Net Losses Incurred 190000,000

Loss-Adjusted Expenses 10,000,000

Commissions 19,000,000

Premium Taxes 5,900,000

General Insurance Expenses 40,990,000

Calculate the following ratios based on the data shown in the profit and loss statement (Note: Marks will not be awarded if you do not interpret your results).

1. Loss ratio (1.5 Mark)

2. Expense ratio (1.5 Mark)

3. Combined ratio (1.5 Mark)

4. Investment income ratio (1.5 Mark)

5. Overall operating ratio (1.5 Mark)

6. Assume that the insurance company in this question uses the experience rating method to charge the premiums for all the policies. For a particular policy, if the annual premiums are Rs 90,000, the expected loss ratio is 49 percent and the credibility factor is .20. What will be the reduction/increase in the premium and what will be the premium for the next policy year? (1.5 Marks)

7. Assume that the insurance company in this question wrote 7009000 policies. What would be the pure premium? (1 Marks)

THE SUBJECT IS RISK AND INSURANCE