Income Statement Formulas: Archived 2025-03-03

Here are some formulas to keep in mind.

item	formula
U/W income	= EP – (current AY loss) – (change in prior years' AY loss) – LAE – (other U/W expense)   1 = EP – (current AY loss & LAE) – (change in prior years' AY loss & LAE) – (other U/W expense)   1a
net investment income ( same as: net investment income earned )	= (investment revenue) – (investment expenses) – (non-federal TLF)   2
net investment gain	= net investment income + (net realized capital gains) – taxes   2a
other income	= SUM(agents' balances charged off, service fees, aggregate write-ins)
TOTAL net income	= (U/W income) + (net investment gain ) + (other income) – (dividends to policyholders) – (fed/foreign taxes incurred)  3

¹ SAP uses incurred expenses (not paid expenses because incurred is more accurate than paid)

→ Use version 1 of the U/W Income formula for E (2018.Spring #10a) because the LAE is given as a single number.

^1a This version of the formula treats Loss and LAE the same way but the information must be provided in that format.

→ Use version 1a of the U/W Income formula for of E (2016.Spring #18b) because loss & LAE are given in the same format.

² Investment revenue excludes realized capital gains AND excludes unrealized capital gains

^2a by definition: (net investment income earned) is already net of expenses and in this problem also net of taxes

(there is a helpful forum discussion on the difference between "investment income earned" and "investment gain".)

³ If you look at the given information in the exam problem, all of the little items in the bottom box (below unrealized capital gains) are included in the income calculation except dividends to stockholders. Normally you would also have to subtract federal & foreign income taxes, but this is not provided in the given information.