The Better Insurance Company has the following financial statements. 2017 2016

Net Premiums Written 48,612 47,398

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Income Statement ($ mils.)

Premiums Earned 42,624 48,321

Loss Expenses 30,746 34,364

Operating Expenses 17,720 17,693

Total Policy Expenses 48,466 52,057

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

Net Investment Income 15,700 19,995

Operating Income before taxes 9,858 16,259

Dividends to Policyholders 6,517 10,361

Income Tax 1,294 1,670

Net Income $2,047 $ 4,228

Ave Investment Yield 4.94% 5.89%

(mils.) 2017 2016

Total Assets $381,972 $406,529

Liabilities

Total Liabilities $349,069 $369,700

Total Equity 32,903 36,829

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

a. 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 firms OPM, OROA, ROA, ROE, and equity multiplier (EM).

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

NUM 2017 __________ NUM 2016 ______________

Recall: expense ratio = (operating expenses/net premiums written) and loss ratio = (loss expenses/premium earned), and combined ratio = (loss ratio + expense ratio), and overall profitability ratio = {[100% - Combined Ratio%] + (Investment Yield% }for the firm each year) Also calculate asset turnover (revenues/total assets), net profit margin [net income/revenues], operating ROA (operating income/total assets), return on assets (net income/total assets) and return on equity (net income/equity accounts), and equity multiplier (total assets / equity).

2017 2016

Expense ratio

Loss ratio

Combined ratio

Average Investment Yield

Overall Profitability

Dupont Analysis:

Asset Turnover

Net Profit Margin

OROA

ROA

ROE

Equity Multiplier (EM)

b. Analyze the trends in all of the ratios, and the other financial information provided. What do they reveal for trends over time including trends as well on the firms balance sheet? What areas of strength & weakness are revealed? What advice for improvement would you give?