An insurance company collected $4.2 million in premiums and disbursed $2.02 mill

Question

An insurance company collected $4.2 million in premiums and disbursed $2.02 million in losses. Loss adjustment expenses amounted to 7.2 percent and dividends paid to policyholders totaled 1.8 percent. The total income generated from their investments was $230,000 after all expenses were paid. What is the net profitability in dollars? (Enter your answer in dollars not in millions.)

An insurance company collected $4.2 million in premiums and disbursed $2.02 million in losses. Loss adjustment expenses amounted to 7.2 percent and dividends paid to policyholders totaled 1.8 percent. The total income generated from their investments was $230,000 after all expenses were paid. What is the net profitability in dollars? (Enter your answer in dollars not in millions.)

Explanation / Answer

Solution: Net profitability $2,032,000 Working Notes: Statement of Net Profitability Premium collected $4,200,000 Less: Disbursed in losses $2,020,000 Less: Expenses $302,400 [7.2% x $4,200,000] Less: Dividends paid $75,600 [1.8% x $4,200,000] Add: Investment returns $230,000 Net profitability $2,032,000 Please feel free to ask if anything about above solution in comment section of the question.

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