Introduction to Insurance Financial Statements

Course Objectives

Participants will be equipped to:
Distinguish the risks inherent in the main products offered by life, non life and re-insurance companies and recognise how they are reflected in the financial statements
Understand the components of an insurance company technical account, income statement and balance sheet
Recognize the impact of differing accounting standards, reserving policies and changes in external variables (such as interest rates and asset prices) on the financial statements
Calculate and apply basic ratios to quantify an insurance company's performance.

Target Audience
This programme is designed for analysts, who have limited or no experience in the analysis of insurance company financial statements. The workshop is designed as a preparation for the Insurance Company Analysis workshop.

Content
STATEMENT LOGIC
Types of insurance company
Life, non-life and re-insurance
Relating the business to the balance sheet and income statement
Key activities and products
Risk profile and accounting for differing products
Non-life products - short tail and long tail lines
Life products - term assurance, with profits (endowment), guaranteed investment contracts, annuities, asset management and other savings products
Re-insurance - treaty and facultative re-insurance.
Accounting and disclosures
Sources of information and quality of disclosure
Financial statements - technical / revenue accounts and regulatory filings, balance sheet and income statement, cash flow analysis
Premium accounting - gross versus net, written versus earned
Claim accounting non-life - claims incurred versus paid, un-expired risks
Claim accounting life - benefits and surrenders, annual and terminal bonuses
Technical reserves - claims reserves, unearned premiums, mathematical provisions, equalisation and investment reserves
Investment accounting - marked to market versus cost accounting
Impact of re-insurance on assets, liabilities and claims
Intangible and other assets - deferred acquisition costs, PV in force business, embedded value
RATIO ANALYSIS
Investment risk - types of investment and quantifying investment risk
Underwriting risk - claims / loss ratio, combined ratio and other indicators of underwriting performance, reserve adequacy
Profitability - key profitability ratios
Capital adequacy - types of capital and ratios used to measure gearing and capital adequacy.