Explanation of Terms Used in Condensed Financial Statement Tables

• "Direct"

  Is the term used to describe insurance transactions between the insurance buyer and the insurance company before or without regard to reinsurance transactions among insurance companies.

• "Premium written"

  Is usually defined as premium billed by property and casualty companies. Rules of life insurance accounting require reporting premiums actually collected. This item is a measure of marketing activity in this state for the year.

• "Premium earned"

  Is constructed from premium written this year and in previous years, and in some instances, premium to be written in the future for current coverages. It is approximately the pro rata portion of the premium charged for each policy, for the portion of coverage provided, within the calendar year.

• "Losses incurred"

  Equals losses paid, plus a year-end estimate of future payments for all current and prior year claims, minus the losses incurred estimate for the preceding year.

• "Loss ratio"

  Equals losses incurred divided by premiums earned. This is the best accounting representation of the portion of each premium dollar that has been needed to honor the company's promise to pay claims.