Surplus Flashcards Preview

Exam 6 > Surplus > Flashcards

Flashcards in Surplus Deck (7)
Loading flashcards...

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 & charge surplus directly


Non admitted portion of interest due & accrued

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


Non admitted portion of accrued retrospective premium

10% of the unsecured accrued retrospective premium is non admitted


Non admitted portion of real estate

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


Equation for the cost of double taxation (after tax)

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


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