Module 7 &8: Management Issues for Non-Depository Institutions

The Save You Insurance Company has the following financial statements.20202019

Net Premiums Written48,61247,398

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Income Statement ($ mils.)

Premiums Earned42,62448,321

Loss Expenses30,74634,364

Operating Expenses17,72017,693

Total Policy Expenses48,466 52,057

Net Underwriting Gain/Loss(5,842) (3,736)

Net Investment Income 15,700 19,995

Operating Income before taxes9,85816,259

Dividends to Policyholders 6,517 10,361

Income Tax 1,2941,670

Net Income$2,047 $ 4,228

Ave Investment Yield4.94%5.89%

(mils.)20202019

Total Assets$381,972 $406,529

Liabilities

Total Liabilities$349,069$369,700

Total Equity32,90336,829

Total Liabs. & Equity$381,972$406,529

5a. Calculate and evaluate the Net Underwriting Margin (NUM); Loss Ratio

Expense Ratio; Combined Ratio; and Overall Profitability Ratio for each year

using the information in the income statement above.Also calculate the firm's OPM, OROA, ROA, ROE, and equity multiplier (EM).

Recall NUM = (Premiums Earned - Total Policy Expenses) / Total Assets

NUM 2020__________NUM 2019 ______________

20202019

Expense ratio

Loss ratio

Combined ratio

Average Investment Yield

Overall Profitability

Dupont Analysis:

Asset Turnover

Net Profit Margin

ROA

ROE

OROA

Equity Multiplier (EM)

5b. Give an overview for why the insurance companies overall profitability changed in 2020 including trends in the expense ratio, loss ratio, and combined rate, and average investment yield.

Do Dupont analysis explaining why the ROE and ROA for the insurance company changed in 2020 (based on the Operating Profit Margin, Asset Utilization, and the Equity Multiplier.