Income Statement: Statutory Net Income (easier version)
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Calculate the statutory net income for calendar year CY. (Modeled on 2018.Spring #10)
| CY written premium (year x) |
888,888 |
| CY earned premium (year x) |
|
| AY ultimate loss (year x) |
|
| change in AY ultimate loss (prior years) |
|
|
LAE |
other U/W
expense |
investment
expense |
| expenses incurred |
888,888 |
888,888 |
888,888 |
| expenses paid |
321 |
888,888 |
888,888 |
| net investment income earned |
111 |
| net realized capital gains |
|
| net unrealized capital gains |
|
| net gain from agents' or premium balances charged off |
|
| finance & service charges not in premiums |
|
| aggregate write-ins for miscellaneous income |
|
| dividends to policyholders |
|
| dividends to stockholders |
|
U/W income
= EP – (current AY loss) – (change in prior years' AY loss) – LAE – (other U/W expense)
investment income
= [ (investment revenue) ] – (investment expenses)
= [ (net investment income earned) + (net realized capital gains) ]
other income
= SUM(agents' balances charged off, service fees, aggregate write-ins)
TOTAL NET INCOME
= (U/W income) + (investment income) + (other income)
– (dividends to policyholders)
– (fed/foreign taxes incurred)
Trick 1
SAP uses incurred expenses (not paid expenses)
Trick 2
investment revenue includes realized capital gains but excludes unrealized capital gains
Trick 3
dividends to stockholders is not included as a charge to income (although it does reduce surplus)
Solution:
| statutory net income |
999,999 |
| U/W income |
999,999 |
| investment income |
999,999 |
| * other income |
999,999 |
* Don't forget to subtract
dividends to policyholders and
fed/foreign taxes incurred to get total net income.
