Financial Operations of Insurers According to the Insurance Information Institute (111), the largest writer of property/casualty Insurance by direct premiums written in 2018, is State Farm Mutual Automobile Insurance. The 2018 annual report to policy holders can be found below and contains data for 2017 and 2018: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Statement of Condition (in Millions of dollars) Assets 2018 2017 Cash and Short Term Investments $ 2,384 $ 2,527 Bonds 53,043 45,751 Unaffiliated Common & Preferred Stocks 47,852 55,303 Equity in Insurance Subsidiaries 40,729 39,030 Other Assets 15,857 18,121 Total Assets Liabilities Claims and Claim Expenses $ 32,554 $ 33,237 Unearned Premiums 12,924 13,132 Other Liabilities 13,634 17.358 Surplus Funds for Protection of State Farm Mutual Policyholders, including the Investment Fluctuation Reserve $ 55,434 $ 53,863 Funds Assigned for Protection of Customers of Subsidiaries 42,534 40,816 Funds Assigned for Catastrophe Reinsurance Assumed from Affiliates 2,785 2,326 Total Liabilities and Surplus Summary of Operating Data (in Millions of Dollars) 2018 2017 Premium Earned $ 43,426 $ 42,420 Less Dollars for Claims 26,524 31.092 Expenses for Paying Claims 5.235 5,417 Service and Administrative Fees 10.385 10.192 Underwriting Gain or (Loss) Plus: Investment Gain and Other Income 5,786 4039 Income before Dividends and Taxes Less: Dividends to Policyholders 0 Income Taxes incurred (Recoverable) 718 (1944) Net Income Part 1: Balance Sheet Part 1: Balance Sheet A) Fill in the assets portion of the table and calculate Total Assets (8 points) B) Fill in the liabilities portion of the table and calculate Total Liabilities (8 points) C) Fill in the surplus portion of the table and calculate Surplus (8 points) Part 2: Income and Expense Statement D) Fill in the table and calculate Net Income (8 points) E) Calculate the Loss Ratio (8 points) F) Calculate the expense Ratio (8 points) G) Calculate the combined Ratio (8 points) To forecast 2019 values, assume that the growth rate in the values between 2018 and 2017 will remain the same for 2019. The growth rate can be calculated via the following formula: Growth Rate X1 X2012 X2017 To calculate the 2019 values (where X is any specific variable), apply the Future Value formula as follows: Xot X (1+Growth Rate) The surplus can be calculated based on the following formula: Surplus - Total assets - Total liabilities In part 2 of the project, the following formulas are utilized: Net Income Income Before Dividends and Taxes Income Taxes The surplus can be calculated based on the following formula: Surplus = Total assets - Total liabilities In part 2 of the project, the following formulas are utilized: Net Income = Income Before Dividends and Taxes -Income Taxes Loss Ratio Incurred losses +Loss adjustment expense Premiums Earned Dollars for Claims + Expenses for Paying Claims Premiums Earned Expense Ratio Underwriting Expense_Service and Administrative Fees Premiums Written Premiums Earned (Assume that premiums written = premiums earned) Combined Ratio Loss Ratio +Expense Ratio Note: Be sure to format dollar values to Currency with no decimal points and rates to Percentages with two decimal places. In your report, comment on the balance sheet of State Farm, how it has changed over time, and how it is forecasted to change. In addition, comment on the Net Income and Combined Ratio and how these values have changed over time. How is the company performance in underwriting and performance overall? D 2017 2018 Growth Rae 2019 1 Assets 2 Cash and Short Term investments 3 Bands 4 Stock 5 Equity In Subsidiaries 6 Other Assets 7 Total Assets B 9 B) 0 1 Liabilities 2 Claims and Claim Expenses 3 Unearned Premium 4 Other Liabilities 5 Total Liabilities 6 70 2017 2018 Growth Rates 2019 2017 2018 Growth Rates 2019 19 Surplus o Investment Fluctuation Reserve 1 Protection of Customers of Subsidiaries 12 Catastrophe Reinsurance Assumed from Affiliates 13 Total Liabilities and Surplus 14 35 Surplus 36 7 2017 2018 Growth Rates 2019 19 Part 2) Income and Expense Statement 0 11 D 12 13 Operating Data 34 Premium Earned 45 Dollars for Claims 46 Expenses for Paying Claims 47 Service and Administrative Fees 45 Underwriting Gain or (Loss) 49 Investment Gain and Other Income 50 Income Before Dividends and Taxes 5: Dividends to Policy Holders 52 Income Taxes incurred (Recoverable 53 Net Income 54 55 0 56 Loss Ratio 57 58 9 59 Expense Ratio 60 61 G) 52 Combined Ratio 63 54 $0 151,944) 50 5718 50 $1.470