Looking during an Insurance Company’s Balance Sheet

Finding, pricing, and handling a risks of a insured aren’t all that word companies do. Insurance companies also have to conduct their investment risks they take when they make investments regulating a premiums they accept from their business to beget additional returns.

In this shave from the Industry Focus: Financials podcast, The Motley Fool’s Gaby Lapera and Jordan Wathen plead ways that investors can demeanour to an word company’s financial reports to know only how many risk it is holding with a customers’ (and stockholders’) money.

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This podcast was available on Apr 4, 2016. 

Gaby Lapera: How would we weigh either or not a association is doing good on a investment side of their business model?

Jordan Wathen: If we go to a financial statements and we demeanour during a investments, we like to demeanour during that generally given we can unequivocally find out how many risk they’re taking. One consider they’ll always uncover is a commission … Most insurers deposit mostly in bonds, so we demeanour and we can see for instance by credit rating, they’ll uncover commission of investments that are hold in supervision securities, percentages that are hold in AA corporate bonds. That gives we a good thought of how unsure an word association is. There was one unequivocally tiny insurer that was run by some unequivocally engaging people. For a prolonged time it had a lot of a income deposit in bullion holds and bullion and silver, that if we consider about it is a flattering terrible approach to run an word change sheet, given if during a same time bullion goes down a outrageous whirly through, you’re in a universe of hurt.

Lapera: That is unequivocally interesting. Gold is whole another emanate we could do an whole podcast on. There are really emanate some bullion bugs out there, we consider one of my colleagues called them a other day. Which is crazy given ever since, what’s his name, William Jennings Bryan we didn’t comprehend that this was still a thing that people were so spooky with.

Wathen: Right, yeah. If we ever have some survivalist friend, your word association competence wish to double consider it. That’s one of a biggest risks, though for a many partial many vital word companies are flattering plain vanilla in how they deposit their money. It’s contend 95% bound income or holds and 5% stocks. They’re not meddlesome in holding too many risk on that, given they know a lot of a income they take in in premiums will have to be paid out in waste and responsibility comparatively soon.

Lapera: Yeah. Okay, here’s a thing right, is that we’re doing an part about something that a lot of people consider is super boring, so we asked Jordan Wathen to come adult with some fun contribution about insurers. we consider it competence be time after articulate about some unequivocally tedious bonds, to come adult with a fun fact. Do we wish to go for it?

Wathen: Yeah. We can go with some fun facts. Way behind in a day … Actually initial we should give a scream out to this book that is called The Invisible Bankers. Actually it was engaging that we talked about word companies being like banks. The book is called, Invisible Bankers, we would rarely suggest we review it. You can get it on Amazon for all of a dollar, so it’s value checking out. One of a few of a fun things they had in there was one about in a grain day of atmosphere travel, word companies done a happening offered life word to atmosphere travelers. They fundamentally pitched it as this outrageous risk, that removing on a craft was fundamentally holding a outrageous risk with your life. But all a same time, while they’re offered travelers life word on a plane, they’re underwriting pilots during a customary rate. Basically they’re revelation travelers that roving is so dangerous, though a people who fly for a living, they’re only customary risks.

Lapera: That is super sneaky. Again, because maybe people consider that people who work in financial services are villains. Take note in box we wish to change your perception, word companies.

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