A major French insurer is in a position to take over an Irish-based insurance company called Farm Insure Ltd. Farm Insure has a particular focus on agricultural insurance which may complement the French insurers expertise in this sector. Using some preliminary information on Farm Insure, 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 Farm Insures policyholders surplus?

2. Last year, Farm Insure 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. Farm Insure Plus is the companys main insurance product and it is sold to 35,000 farmers in Ireland. Farm Insure 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 Farm Insure Plus?

4. If the gross rate for Farm Insure Plus is 78.12, what is the expense ratio?

5. Although Farm Insure made a net underwriting loss last year, it paid 1.25 million in taxes. Explain why this was the case.