Free Asset Ratio

(redirected from Free Asset Ratios)

Free Asset Ratio

A measure of an insurance company's ability to expand its services. It is calculated as the total value of its assets over and above the value of its assets that are used to collateralize individual policies.
References in periodicals archive ?
The key measures analysed were solvency cover, available and excess assets and free asset ratios, according to Life Strategies' analysis of the IFSRA returns of the nine largest life insurance companies currently writing new business in Ireland.
Free asset ratios, which measure the extent to which a life office's assets exceed its liabilities, have traditionally been used as a measure of financial strength.
An assessment based on the tough new 'realistic' valuation system, gave the society a free asset ratio - a key measure of financial strength - of 26.5 per cent.
A report in June this year gave Standard Life a free asset ratio of 5.1 per cent.
Wesleyan is ranked as one of the UK's strongest life offices and has one of the highest free asset ratios in the industry.
But at the bottom end of the table Cornhill, Equitable Life, London Life and Sun Life all had free asset ratios below one per cent once future profits were stripped out.
But echoing Sir Howard's remarks, Mr Bennison added that although the free asset ratios were low, firm's still had sufficient assets to cover their liabilities and investors should not panic.
But then yesterday a report by Money Marketing Online and actuaries KPMG found the average free asset ratio, which measures the level of life insurance companies' assets not needed to meet liabilities and solvency margins, had fallen from 10.1 per cent in 2000 to 6.3 per cent in 2001.
It said that if the use of future profits was stripped out of the equation the fall was even steeper, with the free asset ratio dropping from an average of 9.6 per cent in 2000 to five per cent last year.
'There has been much recent media comment about leading insurers' free asset ratios and this has followed consumer concern about with profits low-cost endowment policies, intended to pay off home loans.