Dividends to Stockholders - Surplus Change

tubaguytubaguy
in Odomirok.8-9-IS

I'm confused with how Stockholder Dividends affect Surplus.

In the Liberty Mutual Income Statement, the "Dividends to Stockholders" on line 35 decreases the surplus. However, in the exam problem 2018_Fall_Q16, "Dividends to Stockholders" increases the surplus.

Clearly there's something I don't understand. Where am I confused?

Thanks!!!

Comments

  • grahamgraham

    In the version I'm looking at, "Dividends to Stockholders" is shown in parentheses which means it's a negative value. (So including it in the sum of lines 22 to 37 would cause a decrease in surplus.)

    "Dividends to Stockholders" is money out the door so intuitively it has to result in a decrease to surplus.

  • grahamgraham

    P.S. Sorry it took me a few days to post this. I had written my answer but then forgot to click "Post Comment" so it was sitting in my drafts folder.

  • tubaguytubaguy

    Thanks! I now see where my confusion came from...

    For F18_Q16 in the examiner's report, the surplus change was calculated as this:

    ...
    IEE’s Profit: 106 (=402+187-278-30+227)
    Cap Gains Tax: -72
    FIT: -83
    Change in Nonadm Assets: +41 = -(150-191
    Change in Prov for Rein: +51 = -(134-185)
    Change in Net Unreal Cap Gns: -46
    Div to SH: 105
    Change in PHS: -108
    ...

    Which looks like they were adding the dividend. They forgot to add a minus sign here, even though they subtracted the 105 in the list of items to get the surplus change as -108.

  • grahamgraham
    edited September 2019

    Oh yes. I didn't actually notice the missing "-" sign. My brain just subtracted it automatically. I will add a footnote in the wiki about that. Thx! (This problem is listed in the BattleTable for the NAIC.IRIS reading because the overall goal of this problem is to calculate IRIS 7.)

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