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Calculating Insurance Float and Cost of Float

  • 11-11-2011 9:25pm
    #1
    HobbyMan
    Banned (with Prison Access) Posts: 212 ✭✭


    I am interested in researching insurance companies for investment purposes and have a question regarding float. I realise that it is an estimated figure but I'd like to get a grip on how to calculate it and how to calculate the cost & return of/on float.

    Could someone knowledgable about the insurance sector please show me how to calculate float, cost of float and return on float using the 2010 Munich Re annual report:

    http://www.munichre.com/publications/302-06773_en.pdf

    I have made an attempt at calculating float as follows:

    Unearned Premiums ( Reference C I on liability side of B/S ) = € 7,879

    Plus

    Provisions ( Reference C I & II under liabilities ) = € 104,413 + € 49,501 = € 153,914

    Plus

    Other Technical Provisions ( Reference C IV ) = € 9,555 ( not sure if I should include this line )

    Total = € 171,348

    Less

    Net Deferred Acquisition Costs ( Reference G on asset side ) = € 9,093

    Less

    Deferred Tax Assets ( Reference H ) = € 5,959

    Total = € 15,052

    Therefore Float = € 171,348 less € 15,052 = € 156,296

    Would you agree with this figure or what else would you add or subtract ?

    I appreciate all replies.
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