India why I cant find accounts payable for any insurance companies

[d.harish008]

Hi,
I am doing my MBA program and I am doing a research on insurance companies. I am trying to find the operating cash cycle of major insurance companies. To my surprise I cant find the accounts payable for any of the insurance companies, I check all major insurance company's balance sheet, but could not find it. So I suppose this common in this industry. But I cant find the reason for it. If anyone can educate me or if someone is can find these numbers please point me to the right direction.

 

[BIG E]

See if this helps you: https://www.fool.com/personal-finance/2007/01/26/understanding-an-insurers-balance-sheet.aspx

 

[DrStrangeLove]

Hi,
I am doing my MBA program and I am doing a research on insurance companies. I am trying to find the operating cash cycle of major insurance companies. To my surprise I cant find the accounts payable for any of the insurance companies, I check all major insurance company's balance sheet, but could not find it. So I suppose this common in this industry. But I cant find the reason for it. If anyone can educate me or if someone is can find these numbers please point me to the right direction.

Accounts payable, in the same sense as for other industries, aren't a huge thing for insurance companies. Insurers don't use trade credit the same way as, say, manufacturers or retailers. The largest payables an insurance company will face will be benefit claims payable (death benefits payable or surrenders payable for life, annuity benefits payable for annuities, A&H or P&C claims payable for those lines). And the payables themselves will be relatively small because there are facility of payment laws in many jurisdictions that require insurers to pay benefits promptly. Health insurers and P&C insurers will have larger payables, on average, because their lines are primarily driven by premiums and claims, so cash flows through them faster than through life/annuity companies.

Payables generated by overhead--wages payable, commissions payable, et al.--are a significant source of payables. Those payables will look and act like other industries. But the overhead/operations part of an insurance company is generally small compared to the investment and inforce management parts.

Also, reinsurance generates payables and receivables (often called "recoverables") that can look similar to payables/trade credit. Those will be substantial for most insurers. But be aware that some forms of reinsurance are "funds withheld", designed to accrue liabilities instead of settling up frequently with cash. Moreover, some reinsurance treaties settle recoverables/payables only quarterly, which would affect your measurement of the operating cash cycle.

 

[d.harish008]

Accounts payable, in the same sense as for other industries, aren't a huge thing for insurance companies. Insurers don't use trade credit the same way as, say, manufacturers or retailers. The largest payables an insurance company will face will be benefit claims payable (death benefits payable or surrenders payable for life, annuity benefits payable for annuities, A&H or P&C claims payable for those lines). And the payables themselves will be relatively small because there are facility of payment laws in many jurisdictions that require insurers to pay benefits promptly. Health insurers and P&C insurers will have larger payables, on average, because their lines are primarily driven by premiums and claims, so cash flows through them faster than through life/annuity companies.

Payables generated by overhead--wages payable, commissions payable, et al.--are a significant source of payables. Those payables will look and act like other industries. But the overhead/operations part of an insurance company is generally small compared to the investment and inforce management parts.

Also, reinsurance generates payables and receivables (often called "recoverables") that can look similar to payables/trade credit. Those will be substantial for most insurers. But be aware that some forms of reinsurance are "funds withheld", designed to accrue liabilities instead of settling up frequently with cash. Moreover, some reinsurance treaties settle recoverables/payables only quarterly, which would affect your measurement of the operating cash cycle.

Thank you, that was quite elaborative. As of now I am trying to get the solvency ratios and liquidity ratios of a few major insurance companies and taking an average of them. But I was wondering if I can get these benchmark numbers from somewhere directly. Let me know if you have any source.

 

[DrStrangeLove]

Thank you, that was quite elaborative. As of now I am trying to get the solvency ratios and liquidity ratios of a few major insurance companies and taking an average of them. But I was wondering if I can get these benchmark numbers from somewhere directly. Let me know if you have any source.

"Solvency ratios" in insurance vary by country and LOB. In the US, solvency is judged by risk-based capital (RBC) ratios measured on a "statutory" basis for each legal entity that comprises it. (States in the US regulate insurance company solvency, and each state's solvency accounting scheme is codified in state insurance law.) If you have a particular American company in mind, their website may have their recent statutory statement and accompanying RBC exhibits. GAAP solvency ratios will be different, since GAAP is income statement focused and for the consolidated economic enterprise, and statutory accounting is balance sheet focused and for each legally separate entity within the company.