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Compare a US life insurer's profitability, liquidity and capital using prepared finance workbooks. Keep statutory and GAAP measures separate, reproduce each calculation and check the reporting basis before interpreting a trend.
Life insurance ratio analysis compares profitability, liquidity and capital using the same entity, reporting basis and period definitions. Begin with prepared finance exports, preserve the distinction between statutory accounting and US GAAP, and trace every ratio back to its approved inputs. A better earnings ratio can coexist with weaker liquidity or a falling capital ratio.
Choose the operating insurer, rather than silently combining it with its holding company. Record the legal entity, fiscal dates, currency, accounting basis and whether separate accounts are included. Match those choices across comparison periods.
Statutory accounting and GAAP can produce different assets, liabilities, income and equity. Genworth's annual filing describes statutory accounting's focus on policyholder obligations and explains that its financial amounts differ from GAAP. Keep GAAP return on equity in a separate analysis from statutory return on capital and surplus.
Request the approved statutory statements, income detail, capital and surplus rollforward, investment availability schedule, treasury payment schedule and prepared risk-based capital output. If the review also uses GAAP reports, label every corresponding worksheet clearly.
The New York Department of Financial Services filing checklist lists financial statements, risk-based capital reporting and actuarial materials separately. Use the completed materials relevant to your insurer; a ratio worksheet is a management review of those inputs, not a replacement for their preparation or certification.
The general financial ratios guide provides broader business definitions. An insurer requires additional care because investment assets and long-duration policyholder obligations do not behave like a distributor's inventory and trade payables.
This illustrative US life insurer uses statutory capital and surplus and statutory net income for both completed fiscal years. The liquidity inputs cover unrestricted cash and unencumbered short-term investments available for general-account payments. Treasury supplies the next 12 months of gross scheduled payments; this deliberately narrow measure excludes future inflows.
Column A contains the input name, B contains 2024 and C contains 2025. Row numbers below identify their worksheet locations. All amounts are USD.
| Row | A: Prepared input | B: 2024 (USD) | C: 2025 (USD) |
|---|---|---|---|
| 2 | Statutory net income | 18,000,000 | 21,000,000 |
| 3 | Opening capital and surplus | 190,000,000 | 210,000,000 |
| 4 | Closing capital and surplus | 210,000,000 | 230,000,000 |
| 5 | Unrestricted cash | 50,000,000 | 40,000,000 |
| 6 | Available short-term investments | 70,000,000 | 80,000,000 |
| 7 | Next 12 months' scheduled gross payments | 100,000,000 | 150,000,000 |
| 8 | Admitted assets | 2,000,000,000 | 2,200,000,000 |
| 9 | Statutory liabilities | 1,790,000,000 | 1,970,000,000 |
| 10 | Prepared total adjusted capital | 220,000,000 | 240,000,000 |
| 11 | Prepared authorized control level RBC | 50,000,000 | 60,000,000 |
Do not combine cash and investments from one entity with payments from another. Available short-term investments must exclude balances already included in cash, assets pledged to others and assets unavailable to this payment population.
For the income ratio, use the full year's income and average beginning and ending capital. For liquidity, use the asset position at each year-end and the following payment horizon. That distinction belongs in the column notes so later reviewers can reproduce it.
The spreadsheet formulas below work from the input table. Copy each B formula across to C. Percentages are rounded to one decimal and liquidity multiples to two decimals; underlying calculations retain full precision.
| Measure | Formula for 2024 | 2024 (USD where monetary) | 2025 (USD where monetary) |
|---|---|---|---|
| Average capital and surplus (USD) | =AVERAGE(B3:B4) |
200,000,000 | 220,000,000 |
| Statutory return on average capital and surplus | =B2/AVERAGE(B3:B4) |
9.0% | 9.5% |
| Available cash and short-term investments (USD) | =B5+B6 |
120,000,000 | 120,000,000 |
| Defined liquidity coverage | =(B5+B6)/B7 |
1.20x | 0.80x |
| RBC, authorized control level basis | =B10/B11 |
440.0% | 400.0% |
The liquidity measure is explicitly an internal coverage calculation, not a standardized regulatory liquidity ratio. It compares a limited asset pool with gross scheduled payments. It neither assumes every investment is immediately saleable nor projects total future cash flows.
Return improved because annual statutory income increased relative to the average capital base. Yet the same available asset pool now covers a smaller portion of scheduled payments. Treasury should explain the larger payment schedule and assess whether expected inflows, maturities or other resources cover it under approved assumptions.
Capital also needs a separate reading: total adjusted capital rose, but its prepared requirement grew faster. A larger dollar capital figure therefore does not guarantee a rising RBC ratio.
Never compare an unlabeled RBC percentage with a peer or a prior workbook. Genworth's RBC discussion distinguishes authorized control level from company action level and notes that its reported subsidiary ratios use company action level. That difference changes the displayed percentage without changing the underlying insurer.
For this example, company action level is twice authorized control level. Holding total adjusted capital unchanged produces:
Company action level = B11*2
RBC on that basis = B10/(B11*2)
The same prepared inputs give these denominator translations:
| Input or result | 2024 (USD except ratios) | 2025 (USD except ratios) |
|---|---|---|
| Total adjusted capital | 220,000,000 | 240,000,000 |
| Authorized control level | 50,000,000 | 60,000,000 |
| Company action level: authorized control level × 2 | 100,000,000 | 120,000,000 |
| TAC / authorized control level | 440.0% | 400.0% |
| TAC / company action level | 220.0% | 200.0% |
These are translations of the illustrative inputs, rather than an assessment of regulatory status. Use the prepared filing, applicable instructions and responsible specialists for that assessment.
First, admitted assets less statutory liabilities must equal closing capital and surplus. With the table above, =B8-B9-B4 and its column C equivalent both return zero. Also confirm that 2025 opening capital equals the preceding closing balance.
Then reconcile the full capital rollforward. Net income alone will not explain every change: capital contributions, distributions and other statutory adjustments may be present. Obtain their prepared detail rather than forcing the difference into earnings.
Tie total adjusted capital and the requirement to the same RBC package and reporting version. Trace the payment schedule to treasury's underlying obligations, and retain the exclusions used to define available investments. Financial data integrity checks provide a broader checklist before these comparisons feed a life insurance dashboard.
Upload a sample of your own prepared insurer finance workbook: Covirage maps the columns, its tools compute and check the figures, and the external AI model explains the result with every figure traced to its rows. Create a free Covirage account and bring the reporting basis and reconciliations alongside your figures.
See Covirage for financial services for the supporting industry context.
That mixes reporting bases and obscures the meaning of the result. Use statutory income with a consistently defined statutory capital base, or GAAP income with corresponding GAAP equity. Keep separate comparisons unless an approved reconciliation explicitly supports the combination.
No. Risk-based capital compares prepared total adjusted capital with a risk-based requirement. A simple surplus-to-assets measure uses different inputs and does not capture the same risks. Always identify whether the RBC denominator is authorized control level or company action level.
No. A defined liquidity measure covers only its specified assets, payment horizon and assumptions. Treasury must also consider timing, surrender behavior, collateral calls and asset availability. A workbook comparison does not certify reserves, regulatory capital or overall solvency.