Adjusted Surplus

AAA

DEFINITION of 'Adjusted Surplus'

The surplus (assets minus liabilities) of an insurance company that differs from the company's statutory surplus due to adjustments. It is calculated by taking the statutory surplus plus the Interest Maintenance Reserve and Asset Valuation Reserve.

The Statutory Surplus is determined by the accounting treatment of assets and liabilities. Insurance companies are required by the National Association of Insurance Commissioners (NAIC) to maintain reserves as a cushion for potential equity and credit losses.

INVESTOPEDIA EXPLAINS 'Adjusted Surplus'

The Adjusted Surplus is an important metric for analyzing the relative strength and standing of a non-publicly traded insurance company. Adjusted Surplus is akin to the retained earnings of a stock-based company, and is a balance sheet item. The Adjusted Surplus grows when the insurance company makes an operating profit and/or experiences gains in its investment portfolio.

RELATED TERMS
  1. Surplus

    The amount of an asset or resource that exceeds the portion that ...
  2. Liability

    A company's legal debts or obligations that arise during the ...
  3. Producer Surplus

    An economic measure of the difference between the amount that ...
  4. Asset

    1. A resource with economic value that an individual, corporation ...
  5. Risk Financing

    The determination of how an organization will pay for loss events ...
  6. Special Employer

    An employer who receives an employee on loan from another business, ...
Related Articles
  1. Home & Auto

    How An Insurance Company Determines Your Premiums

    Find out how insurers use credit history to build an insurance score and how it could affect your bottom line.
  2. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  3. Options & Futures

    Getting the Whole Story on Variable Annuities

    Variable annuities are another way to save money tax-deferred - but don't jump in blindly!
  4. Investing

    What's a Run Rate?

    Run rate is a term used to denote annualized earnings extrapolated from a shorter time frame. Management uses the run rate to estimate future revenues.
  5. Professionals

    Financial Accounting

    Financial accounting is the process of gathering, recording, summarizing and reporting financial data relating to a business. The ultimate goal is to accurately report the financial picture and ...
  6. Investing

    What are Direct Costs?

    Direct costs for finished goods refer to the items and services directly used in production. Other costs such as rent and insurance for the production site are indirect costs. These costs may ...
  7. Investing

    What is Contingent Liability?

    A contingent liability is an amount that might have to be paid in the future, but there are still unresolved matters that make it only a possibility. Lawsuits and the threat of lawsuits are the ...
  8. Investing

    What's Accrued Interest?

    Accrued interest has two meanings. In accounting, it is interest that has been earned, but the time for payment has not yet occurred.
  9. Investing

    What is Absorption Costing?

    Absorption costing is an accounting method primarily used in manufacturing. In absorption costing, the cost of a manufactured product includes the direct costs plus an apportioned share of the ...
  10. Economics

    What Must The UK Do To Keep North Sea Oil Afloat?

    The UK government may need to take drastic action to ensure the viability of UK North Sea offshore oil production amid high costs and shrinking margins.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center