Uncollected premium and agents' balances

us_beta_102

In Spring 2014 #14, the uncollected premium and agents' balances item is still included to calculate Admitted Assets. I am confused here since we do not recognize the Agent Balance > 90 days due as an admitted asset while we still recognize the uncollected amount as an admitted one?

Can you explain the rationale behind those recognitions? Thank you!

graham

If I understand, your question is about part (b) and you want to know the rationale for the 5 items included in the sum to get the total assets. The simplest answer is that these are all balances sheet items that are designated assets. In particular, these 2 line items appear on the balance sheet:

• 15.1 Premiums and considerations: Uncollected premiums and agents balances in the course of collection
• 15.2 Premiums and considerations: Deferred premiums, agents balances and installments booked but deferred and not yet due

A certain percentage of these balances could be nonadmitted but you aren't given that percentage in the question so the easiest assumption is that it's 0%. The graders didn't deduct any points for ignoring this. (This is discussed on page 29 of Odomirok.) Or assume the value is already "net" as in column 3 of the balance sheet.

Be sure to also review BattleCard 9 in Quiz 2. That's the one that drills you on the location of items in the financial statements (assets, liabilities, income statement...). That's useful information here because you have to be able to recognize which items are assets and liabilities.