Flashcards in A11. Feldblum:Surplus Deck (11):
2 definitions of surplus
1. Balance Sheet definition: surplus = assets - liabilities
2. Income Statement definition: surplus = prior years surplus + current year's income
2 Accounting Methods for Nonadmitted assets
1. Method 1: write off the nonadmitted assets as an expense (in the income statement)
2. Method 2: classify the asset as nonadmitted and charge surplus directly.
Non admitted portion of Accrued Retrospective Premium
10% of the unsecured Accrued Retrospective Premium is non admitted.
Non admitted portion of Interest Due and Accrued
Interest Due and Accrued over 90 days overdue is a non admitted asset.
Equation for the cost of double taxation (after tax)
Investment yield * corporate tax rate * (1 - personal tax rate)
Non admitted portion of Real Estate
The permanent excess of book over the market value is a nonadmitted asset
Equation to derive total amount of capital which is subject to the cost of holding capital
-equity in the unearned premium reserves
-equity in the undiscounted reserves
Deferred Tax Asset should be subtracted from this amount.
Margin needed on premiums
Margin as % of premium
Premiums inception, taxes mid year