Calculating Insurance Float

HobbyMan

Hi - I had this up on the investment thread but since I did not receive a single reply I thought I'd try on this insurance thread:

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.

Thanks

BuffyBot

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