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Flashcards in Surplus Deck (7)
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1

2 definitions of surplus

1. Balance sheet definition: surplus = assets - liabilities
2. Income statement definition: surplus = prior years surplus + current year's income

2

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 & charge surplus directly

3

Non admitted portion of interest due & accrued

Interest due & accrued over 90 days overdue is a non admitted asset

4

Non admitted portion of accrued retrospective premium

10% of the unsecured accrued retrospective premium is non admitted

5

Non admitted portion of real estate

The permanent excess of book over the market value is a nonadmitted asset

6

Equation for the cost of double taxation (after tax)

Investment yield * corporate tax rate * (1 - personal tax rate)

7

Equation to derive total amount of capital which is subject to the cost of holding capital

-Surplus
-Equity in the unearned premium reserves
-Equity in the undiscounted reserves
-Deferred tax asset should be subtracted from this amount