financial statements of life insurance
DESCRIPTION
Financial Statements of Life Insurance. Le Huu Phong. Basic understanding needs. Make best decisions. Company’s financial position. Financial Statements. Know potential impacts. Meet business environment. Balance Sheet Profit & Loss ……. Vietnam Life Insurance. - PowerPoint PPT PresentationTRANSCRIPT
Balance SheetBalance SheetProfit & LossProfit & Loss
…………
KnowKnowpotential potential impactsimpacts
MeetMeet businessbusiness
environmentenvironment
Basic understanding needs
FinancialStatements
Company’s financial position
Makebest
decisions
2 insurers’ key financial goals
Solvency Profitabilityowns more
than it owes
earns more
than it spends
2 keysuccess
Cash flowstatement
Owners’ Equity statement
IncomeIncomestatementstatement
BalanceBalancesheetssheets
To answer the question…
Financial statements
Key financial statements
For basic understanding, 2 keysfinancial statements of the Balancesheet and Income Statement under(VAS – Vietnam Accounting Standard)will be introduced.
Balance SheetABC Life Insurance Company
Balance Sheet as of December 31, 2011
Assets 1,095A. Current Assets 219
I. ……II. ……
B. Non-Current Assets 876I. ……II. ……
Liabilities and Owners’ Equity 1,095A. Liabilities 191
I. ……II. ……
B. Owners’ Equity 904I. ……II. ……
Balance Sheet
Balance sheet is a financial statement that shows an insurer’s financial condition as of a specific date.
The main purpose is to measure the owners’ wealth from what a company owes (liabilities) and what it owns (assets).
Balance Sheet - Assets
AssetsA. Current Assets 219
I. Cash equivalents 129II. Short-term investments 20III. Account receivables 55IV. Other short-term assets 15
B. Non-current Assets 876I. Fixed assets 33II. Long-term investments 813III. Other long-term assets 30
Total Assets 1,095
Account classification
ASSETASSET
Cash equivalents Cash on hand and Cash in bank
Investment assets Bonds, Stocks, Time deposits…
Physical assets Buildings, office equipments…
Receivables Interests, business deposits…
Regulatory deposit Legal deposit
Balance Sheet - Assets
AssetsA. Current Assets 219
I. Cash equivalents 129
II. Short-term investments 20III. Account receivables 55IV. Other short-term assets 15
B. Non-current Assets 876I. Fixed assets 33
II. Long-term investments 813
III. Other long-term assets 30
Total Assets 1,095
From 3 monthsand less
Over 3 and less
12 monthsOver
12 monthsLong-termLong-term
Short and Long….
Short-termShort-term
Cash equivalents
Balance Sheet – L & OE
Liabilities & Owners’ Equity
Liabilities 191Current liabilities 20Non-current liabilities 1Technical Reserves 170
Owners’ Equity 904Legal capital 900Retain earnings 4
Total Liabilities & Owners’ Equity 1,095
Account classification
LIABILITIESLIABILITIES
Unpaid policy payables Surrender values, Claims…
Statutory obligations Compulsory insurances, all
kind of taxes…
Vendor payables
Accruals
Deferred tax liabilities
Technical reserves
Account classification
OWNERS’ OWNERS’ EQUITYEQUITY
Paid-in capital Money that an insurer has
invested
Retaining earnings The cumulative amount of a
company’s earning over time
Balance SheetABC Life Insurance Company
Balance Sheet as of December 31, 2011
Assets 1,095A. Current Assets 219
I. ……II. ……
B. Non-Current Assets 876I. ……II. ……
Liabilities and Owners’ Equity 1,095A. Liabilities 191
I. ……II. ……
B. Owners’ Equity 904I. ……II. ……
Basic accounting equation
The basic accounting equationpresents the relationship amongthe three key accountclassifications on the balancesheet: assets, liabilities andowners’ equity.
Assets = Liabilities + Owners’ Equity
Income StatementABC Life Insurance Company
Income Statement For the year end December 31, 2011
Insurance relatedGross premiums 186Expenses (125)
Financial activitiesInvestment income 152 Investment expense (22)
Other activitiesOther income 10Other expenses (3)
Income before tax 198Income tax expense (25%) 50
Net Income 148
Income Statement
Income statement is a financial statement that reports an insurer’s revenues and expenses during a specific period.
The main purpose is to indicates whether the insurer experienced net income (profit) or a net loss during the period.
Income StatementABC Life Insurance Company
Income Statement For the year end December 31, 2011
Insurance relatedGross premiums 186Expenses (125)
Financial activitiesInvestment income 152 Investment expense (22)
Other activitiesOther income 10Other expenses (3)
Income before tax 198Income tax expense (25%) 50
Net Income 148
Income Statement – Part 1
Insurance related (Operating)Revenues
Gross premiums written
Expenses - Increasing in reserves- Contractual benefit pay-outs- Direct expenses- Sale related expenses- Administration expenses
Net operating income
minus
Revenues
Expenses
Agent bonuses
Policy related costs
Customer cares
Brandings
Business development
SaleSaleexpensesexpenses
Expense in details
For agency force
Staff salary & related
Office running costs
Consultant
IT related
Business development
ManagementManagementexpensesexpenses
Expense in details
For staff
Income Statement – Part 2
Financial activitiesRevenues
- Interests of Bond, Time deposits…
- Gain on exchange rate
Expenses - Broker & Custodian fee
- Loss on exchange rate
Net financial activities income
minus
Revenues
Expenses
Income Statement – Part 3
Other activitiesRevenues - Service provided - Gain on sell fixed assets - Others
Expenses - Asset liquidation- Others
Net other activities income
minus
Revenues
Expenses
Internal Users
Users of Financial Statement
External Users
- Management to make decisions.
- Employeeto understand the financial position of company.
- Group policy-owners.
- Beneficiaries.
- Investors
- Tax authorities
- Competitors…
SolvencySolvency ProfitabilityProfitability
Summary
owns more than it owesowns more
than it owesearns more
than it spendsearns more
than it spends
Key to a insurers’ success
Summary
Assets L&OE
4,0502,7501,300
4,050 4,050
What does insurer own?
What does insurer owe?
What has insurer retained?
Balance Sheet
Financial Statement
Liabilities
Owners' Equity
Summary
Revenue 1,500
Expense 1,000
Net income 500
Revenue 1,500
Expense 1,000
Net income 500
What has the Insurer earned?
What has theinsurer spent?
Income Statement
Financial Statement
Summary
Revenue 1,500
Expense 1,000
Net income 500
Revenue 1,500
Expense 1,000
Net income 500
Assets L&OE
4,050 2,750
1,300
4,050 4,050Retained earnings Net income
L&OE