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. Asset

    1. A resource with economic value that an individual, corporation ...
  4. Producer Surplus

    An economic measure of the difference between the amount that ...
  5. Aggregate Stop-Loss Reinsurance

    A type of reinsurance agreement in which losses over a specific ...
  6. Priori Loss Estimates

    A technique used by insurance companies to calculate loss reserves.
RELATED FAQS
  1. Why would you use the TTM (trailing twelve months) rather than the data from the ...

    Public companies report their yearly financial statements along with an annual report. However, financial professionals are ... Read Full Answer >>
  2. Why are insurance companies and pension funds considered financial instruments?

    Insurance policies are widely considered to be financial instruments. Pension funds may contain many different types of financial ... Read Full Answer >>
  3. Why is it important for an investor to understand business accounting?

    Investors use financial statements to obtain valuable information used in valuation and credit analysis of companies. Therefore, ... Read Full Answer >>
  4. What are the business consequences of using FIFO vs. LIFO accounting methods?

    If a company uses a first-in, first-out accounting method (FIFO), it's likely that its reported earnings will be higher than ... Read Full Answer >>
  5. What advantages does EBTIDA-margin have over other profitability ratios?

    The advantages that EBITDA margin has over other profitability ratios is that it measures a company's financial performance ... Read Full Answer >>
  6. How do you analyze inventory on the balance sheet?

    In accounting, inventory represents a company's raw materials, work in progress and finished products. Financial professionals ... Read Full Answer >>
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. Professionals

    How to Fund Retirement with Insurance

    So you've contributed the max to all available retirement vehicles...now what? Consider a permanent life insurance policy (and its fee structure).
  5. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  6. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  7. Economics

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
  8. Fundamental Analysis

    Why Last In First Out Is Banned Under IFRS

    We explain why Last-In-First-Out is banned under IFRS
  9. Economics

    What is Adverse Selection?

    Adverse selection occurs when one party in a transaction has more information than the other, especially in insurance and finance-related activities.
  10. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center