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Course Overview Insurance is a simple concept - but a remarkably complex business This is particularly apparent when looking at the figures. Can you honestly say that you understand how your company's P&L account is made up? Do you know what to look for in the balance sheet? Could you explain the cashflow statement? Are you familiar with technical reserves? Do you know how triangulation works? Above all, are you sufficiently familiar with the figures that you can analyse your business performance and profitability and see how to improve it? This seminar, presented by an expert in the subject who is particularly adept at explaining its intricacies in an easily-understood way, will help ensure that you can answer such questions positively. The combination of theoretical knowledge and practical skills you will gain from it will help you manage your areas of responsibility more profitably and with a greater degree of understanding and confidence. Audience Any non-financial manager or technical expert in the insurance industry, including: - Claims managers
- Business development managers
- Underwriters
- Brokers
- Risk managers
- Project managers
Course Outline Accounting and scorekeeping fundamentals - Financial and management accounting
- What are we trying to measure and why?
- Types of accountants - what they do and the differences between them
- Frameworks and regulations
- Generally accepted accounting practice and the mindset of scorekeepers
- Balance sheets, profit and loss accounts and cash flow statements
- What they tell you and what they don't tell you
- Accruals and matching; revenue and expenses; profit measurement
- Capital and capital maintenance; assets and liabilities - what you own, less what you owe; efficiency measurement
Insurance company's accounts - What is different about insurance companies, and what does this mean?
- The nature of insurance business
- Known income/unknown costs
- The problem of profit recognition
- Cash flow generation v future uncertainty, hence the regulatory framework
- Balancing underwriting losses with investment income profits
- How the problems are 'solved'
- A first look at the recommended accounting practice
- The underwriting/technical account approach
- General/non-technical account approach
General tools to analyse business performance and profitability - The simplest ratios do not need to be calculated
- Common sense
- Up/down trends
- 'Whole picture' analysis
- Specific ratios
- What are the different ratios?
- What do they measure?
- How are they used?
- How should they be interpreted?
- Profit margins; asset velocity; return on investment; return on capital employed; gearing and liquidity
- Earnings per share; dividend cover; interest cover
Review of relative financial performance - Examination of up-to-date comparative financial performance studies
- Surveys and reports on the insurance business
- Review of industry accepted performance measures and norms together with recent trends and issues
- General performance drivers and unquoted company (eps, yield, p/e, market cap. dividend growth) drivers - how well are they doing?
- Understanding capital market pressures on businesses
- What influences share prices and what is meant by terms such as 'equity' and 'shareholder value'?
Underwriting and profit and loss accounting - How raw data converts to financial information
- Building up methodically a simple set of insurance company accounts from scratch
- Premiums written
- Unearned premiums
- Unearned premiums reserve movements
- Reinsurance
- The three types of claims
- Paid, outstanding and unreported (IBNR)
- The effect on reserves (insurance technical funds) by movements in provisions
- Commissions and deferred acquisition costs
- Effect on the year's result and the provisions carried forward
- Management expenses
- Investment accounting explanations
- GAAP results, interest earned, the rest of the profit and loss account
- A different type of business gives rise to a different type of financial statement - a first read through of an insurance company's accounts
Balance sheet accounting - Investments
- What are allowed?
- How are they invested?
- How are they valued and displayed in the accounts?
- Technical reserves - key components such as unearned premium provision, claims, unexpired risk and deferred acquisition cost
- Shareholders' funds
Triangulations - Premiums and claims triangulations
- Incurred but not reported (IBNR)
- Basic chain ladder and other methods
Insurance terminology and measurements - Traditional insurance business ratios
- Acquisition
- Loss
- Management and combined ratios
- How they are calculated and what they mean
- Productivity - each area has its own measure appropriate to the nature of the business
- Developing a structured approach to approving/verifying performance
Other insurance items - Three year v one year accounting
- Who does what?
- Reconciling the two treatments
- Current trends
- Reinsurance
- Inwards and outwards and display and effect on financial statements
- Lloyd's business
- Peculiarities and differences
- Current position
- Pricing business generally
- Tools and techniques
- Risk
- Based capital
- Its importance in tomorrow's successful insurance company
How to make a booking for the F-EFS course
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