Life Insurance

best insurance companies

During the period of 2008 and 2009, the insurance industry witnessed unprecedented fluctuation .The large swings in insurers’ market evaluations, and the significant role that financial reporting played in the uncertainty surrounding insurance companies during that period, showing the importance of understanding insurers’ financial information and its implications for the risk and value of insurance companies. To facilitate an ideal use of insurers’ financial reports, this manuscript shows the accounting practices of insurance companies, discusses the financial analysis and evaluation of insurers as, insurance was created in response to a widespread need for protection against the risk of losses.

It is feasible because it allows many similar individual loss risks to be gathered into classes of risk. Sometimes, however, the underwriting risk is too large to be assumed by anyone or entity, even if the probability that an event will occur can be accurately predicted.

 Definition of an Insurance Contract

A legal definition of insurance that shows in many insurance laws is the following: A contract of insurance is that whereby one party, the insurer, commits, for a premium or an estimation, to make a payment to another party, the policyholder or a third party, if an event that is the object of a risk occurs. It is often defined as a contract of compensation, as the insured is not to make any profit out of the insurance but should only be compensated to the extent of the pecuniary loss.

 Products and services of insurance companies

Insurance companies present primary products and services; first, PC products and LH products, as following;

Property and casualty products (PC)

Contracts provide protection against (a) damage to or loss of property

Caused by various risks, such as fire, damage or theft, (b) legal Responsibility resulting from injuries to other persons or damage to their property, (c) losses resulting from varied sources of business interruption, or (d) losses due to accident or illness.

Life and health policies (LH) insurance

Contracts that pay off in divided sums or annuities upon the insured’s death, disability, or retirement. Some insurance policies, primarily health-related policies, have both PC and LH features and can therefore be classified as either PC or LH. Most insurance companies specialize in either PC or LH insurance, but some have significant operations in both divisions.

Benefits of insurance

The Expected Benefits of Insurance Contracts

The direct advantage of an insurance contract is the exchange, for a fixed fee, of the uncertainty concerning a probable loss, for the certainty of compensation in the case the insured suffer a loss. Compensation is the primary reason why an individual or a company would buy an insurance contract. The reduction of uncertainty is the other motivation because individuals want to avoid risks. The certainty concerning the outcome of a risky situation is, in the case of a pre-loss financing arrangement, one of the risk management objectives of the firm.

  The best insurance company standards


Ratios used to evaluate profitability include Return on Equity (ROE), Recurring ROE, and Onetime ROE. These ratios are related to essentially all firms, but, for mentioned discussed reasons, are particularly important when analyzing insurers and other financial service companies.                                                                        

Accounting quality

Metrics used to evaluate accounting quality include the Recurring Revenue-to-Equity Ratio, Loss Development Ratio (for PC insurers), Premium Growth, Revenue Mix Ratios, Book-Tax Difference Ratio, and the Effective Tax Rate (ETR). The first four are specific to the insurance industry, while the tax-related ratios are related to essentially all companies. Some of the most commonly companies used accounting quality ratios to measure receivables to cash flows.


Metrics used to evaluate growth prospects include historical growth rates in fundamentals such as earnings, revenue, dividends, equity and assets, and firm features such as size and profitability.

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