How do reinsurance companies work

Assignment Help Accounting Basics

Reference no: EM133738033

Discussion Post: XYZ Company Financial Analysis

I. Reinsurance is a form of insurance purchased by insurance companies in order to mitigate risk. Essentially, reinsurance can limit the amount of loss an insurer can potentially suffer. In other words, it protects insurance companies from financial ruin, thereby protecting the companies' customers from uncovered losses.

1. How do reinsurance companies work?
2. What are the Reinsurance Contracts?
3. Give example of reinsurances companies in KSA and describe their main services

II. What is the concept of "Fair Value? Outline the basic difference between fair value and book value of an asset. Explain the key features of fair value defined by FASB ASC.

III. XYZ Company has the following financial data:

Particulars                                                                                                 Amounts (SAR)
Total Profit for the Year                                                                                   377,500
General Takaful Assets (Year 2014)                                                                  1,390,000
General Takaful Assets (Year 2015)                                                                  1,517,500
Cash                                                                                                            11,500
Short-term Investment                                                                                  23,500
Short term liabilities                                                                                       85,000
Underwriting Surplus Distributable to Participants/Participants' Share of Profit      145,500
Gross Contribution                                                                                         958,000
Net Contribution                                                                                             662,500
Wakalah Fee                                                                                                   77,500
Commission Paid                                                                                             28,300
Management Expense                                                                                      58,000
Net Claim Incurred                                                                                           287,500
Earned Contribution                                                                                         632,500

You are required to calculate:

1. Return on Assets
2. Quick Liquidity
3. Surplus Distribution Ratio
4. Expense Ratio
5. Claims Ratio

Reference no: EM133738033

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