Business Education
Understanding Insurance Income Statements



Reading and Analyzing Insurance Income Statements.

Insurance companies generally have very different methods of reporting balance sheet financial information from manufacturing and service organzations. This brief tutorial will give the reader pertinent information in analying an insurance company's operations. The following presents a chart showing the key differences with insurance company balance sheets.

Insurance Company Income Statements

Revenues encompass four main areas for an insurance company. This includes insurance premiums, net investment income, realized gains from investments, and other revenue. Collectively, this is referred to as Total Revenue. When insurance companies report revenues , it is normally accounted for in this order on a income statement for the reader to analyze different components of an insurance companies revenues.

Insurance Premiums...
Net Investment Income...
Net Realized Gains...
Other Income...
= Total Revenue


Insurance Premium
An insurance premium is the amount of money an individual or business pays for an insurance policy. Insurance premiums are paid for policies that cover healthcare, auto, home, and life insurance. Once earned, the premium is income for the insurance company. It also represents a liability, as the insurer must provide coverage for claims being made against the policy.  
Net Investment Income
Net investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, and non-qualified annuities.  
Net Realized Gains

Capital gains realized by an insurance company minus any capital losses divided by the total number of the company's outstanding shares.


    Expenses ...  
Insurance claims and Expenses

Insurance claims and expenses is the largest component of an insurance company's expenses. These are claims by policyholders who have insurance coverage that request to be compensated for damage to property


Amortization of deferred policy acquisition costs

Amortization of deferred policy acquisition costs are essentially the cost associated with acquiring a new policyholder. Deferred Acquisition Costs (DAC) Amortization are acquisition costs that are recognized as an expense that reduces the DAC asset. The process of recognizing the costs in the income statement is known as amortization and refers to the DAC asset being amortized, or reduced over a number of years.