DEFINITION of 'Adjusted Earnings'

The sum of earnings, increase in loss reserves, increase in new business, increase in deficiency reserves, increase in deferred tax liabilities, and capital gains for an insurance company from the previous time period to the current time period. Adjusted earnings provides a measurement of how current performance compares with performance in previous years.

BREAKING DOWN 'Adjusted Earnings'

Calculating adjusted earnings can vary slightly according to what type of insurance business an insurer is in. A property and casualty insurance company will calculate its adjusted earnings by taking the sum of its net income, catastrophe reserves, and reserves for price changes, and subtracting gains or losses from investment activities. A life insurance company will subtract capital transactions, such as increases in capital, from increases in premiums written.

Investors and regulators can examine the performance of an insurance company a number of ways, and often use multiple analytical approaches to ensure that many aspects of the insurance company are reviewed. A qualitative analysis of the insurer’s operations will show how the company plans on growing in the future, how it compensates employees, how it manages its tax obligations, and how effective management is in directing operations. A quantitative analysis will show how it manages its investments, how it determines the premiums to charge for policies that it underwrites, how it manages risk through reinsurance treaties, and how much it requires to retain business and acquire new customers. Investors will also look at the insurer’s adjusted earnings, net worth, and adjusted book value.

Because outside investors do not have access to the same amount of information as internal employees it can be difficult to ascertain an insurer’s adjusted earnings. Approaches may vary according to how they examine expenses and premiums.

RELATED TERMS
  1. Loss Reserve

    An estimate of an insurer’s liability from future claims. Loss ...
  2. Losses and Loss-Adjustment Expense

    The portion of an insurance company’s reserves set aside for ...
  3. Valuation Premium

    The rate set by a life insurance company based on the value of ...
  4. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  5. Insurance Industry ETF

    A sector-following fund that invests primarily in insurance companies, ...
  6. Total Insurable Value

    Total insurable value is the value of property, inventory, equipment, ...
Related Articles
  1. Insurance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  2. Insurance

    12 Insurance Questions for High Net Worth Families

    High net worth families should ask themselves these 12 questions regarding comprehensive insurance.
  3. Insurance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  4. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  5. Insurance

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
  6. Insurance

    Term Life Insurance: Everything You Need to Know

    Term life insurance is an affordable way to financially protect your loved ones after your death. Here's what you need to know before purchasing a policy.
  7. Insurance

    4 Things That Keep You From Getting Life Insurance

    We look at four common reasons people give for not applying for life insurance, and see if they're legitimate.
RELATED FAQS
  1. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  2. How much do changes in interest rates affect the profitability of the insurance sector?

    Learn about the relationship between interest rates and insurance company profitability, and how interest rates can affect ... Read Answer >>
  3. What is the main business model for insurance companies?

    Read about the most important components of an insurance company business model, such as risk pricing, float investing and ... Read Answer >>
  4. What are the main factors that impact share prices in the insurance sector?

    Learn about some of the main factors that impact share prices in the insurance sector. Insurance companies make money by ... Read Answer >>
Hot Definitions
  1. Promissory Note

    A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on ...
  2. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
  5. Nonce

    Nonce is a number added to a hashed block, that, when rehashed, meets the difficulty level restrictions.
  6. Coupon

    The annual interest rate paid on a bond, expressed as a percentage of the face value. It is also referred to as the "coupon ...
Trading Center