The Market Information Group Affiliated Investments An insurance company s investments in the stocks and bonds of its parents, subsidiaries and affiliates. BCAR Best s Capital Adequacy Ratio - A financial benchmark from A.M. Best that compares an insurer s adjusted surplus to the capital necessary to support its operating and investment risk, as determined by A.M. Best. Bond A debt investment in which an investor loans money to an entity that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities. Capital & Surplus Adjustments Adjustments to an insurer s capital and surplus that reflect stock issuances and stock dividends paid. Combined Ratio A measure of underwriting profitability. The combined ratio is the sum of the loss ratio, expense ratio and dividend ratio (the ratio of dividends to policyholders divided by net premiums earned). A ratio below 100% indicates that the company is underwriting profitably. Company Name This is the legal name or an abbreviation of the legal name of the insuring entity. Corporate Bond Bonds issued by a corporation. Debt-to-Equity Ratio A measure of a company s financial leverage calculated by dividing its total debt by shareholders equity or policyholders surplus. Derivative Instruments A tradable asset or security whose value is derived from the value of another underlying financial assets. Equity (Net Worth) The consolidated group s total assets minus total liabilities.
Expense Ratio The expense ratio is calculated by dividing net underwriting expenses by net premiums written. Fair Over (Under) Book Value The difference between the fair value (the estimated value of all assets and liabilities of a company) and book value (the value at which an asset is carried on a balance sheet). Fixed Income A type of investing or budgeting style for which real return rates or periodic income is received at regular intervals at reasonably predictable levels. Government & Agency Bonds that the company is holding that were sold by the government or issued by a government-sponsored agency. GPW to PHS Gross premiums written divided by policyholders surplus. Gross Premiums Written (GPW) The total direct plus assumed premiums written by the insurer before deducting for reinsurance ceded. Group Name The group to which the insurance company belongs as determined by Marsh. The name could be a shortened version of the holding company name or a trade name. Insurer Common/Other Name This is an alternative name for the company. It could be the name the company is called if that differs from the company s legal name or the name of the company in a different language. Invested Assets The insurance company s total invested assets at the indicated date. Investment Grade The amount of bonds and short term investments the insurance company is holding that have ratings higher than junk or high yield bonds. Investment grade instruments are generally rated BBB and higher. Leveraged Assets as % of Invested Assets MBS and other structured securities plus other derivative investments, non-investment grade bonds and real estate all divided by total invested assets. Liquid Assets to Total Liabilities A liquidity ratio that measures a company s ability to pay short-term obligations. Liquid assets exclude real estate, loans and affiliated investments from invested assets. Loss & LAE Incurred This is an income statement item reflecting the amount of money the insurance company has set aside in the indicated time period to pay for claims and loss adjustment expenses, net of reinsurance. The Market Information Group Marsh 2
Loss & LAE Reserve This is a balance sheet item estimating the amount of money the insurance company owes at the indicated date to pay all claims and loss adjustment expenses net of reinsurance. This reserve is generally an estimate because the insurance company does not usually know how much it will have to pay for all claims. Loss Ratio Net losses and loss adjusted expenses incurred divided by net premiums earned. Market Value The current price of a company s stock on an exchange. MBS A type of asset-backed security that is secured by a collection of mortgages. Mortgage & Collateral Loans Debt which the insurance company is holding that are collateralized in some way. These would include mortgages the insurance company has issued whereby the underlying property is the collateral. Net Income A company s total earnings after all expenses. Net Investment Income Earned Total of interest, dividends, and other earnings derived from the insurance company s invested assets in the period in question minus the expenses associated with these investments. Net Leverage The sum of a company s net premium written to policyholders surplus and net liabilities to policyholders surplus. This ratio measures the combination of a company s net exposure to pricing errors in its current book of business and errors of estimation in its net liabilities after reinsurance, in relation to policyholder surplus. Net Paid Losses The claims paid by the insurance company in the period in question, net of reinsurance. Net Premiums Earned The amount of premiums written that the insurance company has earned in the reporting period in question, net of premiums ceded. Net Premiums Written (NPW) Gross premiums written by the insurance company minus premiums ceded to reinsurers. Net Realized Capital Gains/(Loss) The capital gains (losses) the company has realized in the period in question. This would reflect gains or losses from the sale of investments or any write downs (or ups). Net Underwriting Gain/(Loss) Net premiums earned minus net loss and loss adjustment expenses incurred minus net underwriting expenses. This reflects the insurance company s profits or losses in the reporting period in question based solely on underwriting. The Market Information Group Marsh 3
Net Unrealized Capital Gains/(Loss) The mark to market gains or losses the company had in the period in question which they were not required to report as realized gains or losses on their income statement. Operating Ratio A ratio that shows the profitability of a company s ongoing operations. Calculated by taking the combined ratio minus the ratio of net investment income to net premiums earned. A ratio under 100% means the company s operations are profitable. Policyholders Surplus (PHS) Insurance company s total assets minus total liabilities. Similar to shareholders equity. Pool Name The pool which the insurance company belongs to. These are generally in US organizations. The pool is a means by which affiliated companies can share risk via special reinsurance arrangements. Preferred & Common Stocks A security that represents ownership in a corporation. Quick Assets to Quick Liabilities An indicator of a company s short-term liquidity. The quick ratio measures a company s ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company. Quick Assets consist of cash, unaffiliated preferred and common stock, and investment grade bonds. Quick liabilities are calculated by subtracting incurred but not reported losses (IBNR), affiliated payables and the provision for reinsurance from total liabilities. RBC (Risk Based Capital) Ratio Risk based capital is the amount of capital an insurance company needs to have based on its various types of risk according to a complicated formula created by the US National Association of Insurance Commissioners. The risks in question include investment risk, underwriting risk, etc. The RBC Ratio is the ratio of the insurer s reported policyholders surplus to their RBC. A ratio of less than 200% generally requires some type of company or regulatory action. Real Estate The insurance company s investments in real estate. Realized Investment Gain (Loss) Increases (decreases) in assets between the date of purchase and the sell date. Reinsurance Recoverable Amount of an insurer s incurred losses that are owed to the insurance company by its reinsurers. In some cases, reinsurance recoverable is supported by collateral. Short-Term Investments This contains any investments that a company has made that will expire within one year. For the most part, these accounts contain stocks and bonds that can be liquidated fairly quickly. The Market Information Group Marsh 4
Structured Bonds This is broadly defined to include various types of bonds that have characteristics designed to attract certain types of investors and/or take advantage of particular market circumstances. Structured Credit Portfolio A portfolio of lending arrangements customized to the needs of specific clients. Total Liabilities A company s legal debts or obligations that arise during the course of business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services. Includes the amount of money the insurance company has reserved for losses. Underwriting Expenses Incurred Underwriting expenses include salaries, commissions, overhead expenses, office rent, and fees charged for memberships in industry associations. For more information about The Market Information Group visit www.marshmarketinfo.com, or contact your local Marsh representative. Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer, and Oliver Wyman. This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. Any modeling, analytics, or projections are subject to inherent uncertainty, and the Marsh Analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change. Marsh makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or re-insurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage Copyright 2018 Marsh. All rights reserved. Compliance MA16-14868