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QuestionsCategory: Financials QuadrantFinancial Analysis Spreadsheet for Insurance Company
Teng Hau Lee asked 4 years ago

Hi Victor / Rusmin, 
I would like to clarify, how do I put in the number into the financial spreadsheet for an insurance company, ie TuneProtect? 
Based on its annual report, it has operating revenue, earned premium and other revenue like investment income. So how exactly should I key in the data for the company? 

Teng Hau

1 Answers
Rusmin Ang answered 4 years ago

Hi Teng Hau,
As highlighted in the course, we can’t use the excel spreadsheet to analyse financial companies like insurance or bank. 

Rusmin Ang replied 4 years ago

They are very different in term of business and requires different set of lens to look at them.

Teng Hau Lee replied 4 years ago

Thank you for your comment. In that case, would you be able to share specifically how do you analyse insurance companies in terms of their finances?

Teng Hau Lee replied 4 years ago

Or rather what types of investment model, if not investment quadrant, should be used to analyse insurance companies?

Rusmin Ang replied 4 years ago

We do not have insurance course for now but generally for insurance companies, you have look at their Net Earned Premium (similar to Revenue) and Profit After Tax. From there, you get to estimate their underwriting margin.

You’d also have to look at their Net Claimed Incurred Ratio, Mgt Expenses Ratio and Net Commission Ratio which can often be found in their annual report. Also, the standard financial ratio like return on equity. Most importantly, the pre-paid contracts (insurance contracts and payables) and how much the company earns on investment income from deploying their free-floats.

Similar to REIT, insurance can be a very big topic by itself. So it is going to take time for you to study through this sector if you’re new in the industry.

Jieren Zheng replied 4 years ago

You might want to look at financial modeling for the insurance industry as well. It is also a cyclical industry if my memory serves.