Projections of Surplus for Underwriting Strategy

The paper presents a specific modeling approach to the projection of surplus. The model uses assumptions on growth, underwriting results, underwriting cash flow, interest and tax to simulate the operating results of an insurance company. Invisible assets are incremented by cash flow at-d surplus by after tax income on an iterative basis for the years of the projection. Results of several possible underwriting strategies of a multi-line company are compared according to several financial tests. The vehicle for this model is an APL program, whose specifications are part of the paper. It is hoped that the value of a model will be evidenced by this exposition. In addition, some of the components of this particular model may be useful in themselves, and conclusions I have made at least thought provoking.