Change In Policyholder Surplus
What Does Change In Policyholder Surplus Mean?
Changes in policyholder surplus refer to the annual fluctuations in a mutual insurance company’s assets, after subtracting its liabilities. These changes offer insight into the company’s financial performance compared to the previous year. Regulatory agencies frequently use this metric to assess the overall health and performance of insurance companies.
Insuranceopedia Explains Change In Policyholder Surplus
A mutual insurance company’s assets may include investment gains, operating earnings, and contributed capital. To calculate the policyholder surplus, the company subtracts its total liabilities from its total assets for the given period. A significant decline in this figure from one year to the next could signal financial trouble for the company. If the change in policyholder surplus is particularly substantial on the negative side, the company may face a review by the National Association of Insurance Commissioners (NAIC).
