The ABC Company has net written premiums in the amount of $4,123,892,369 and a policyholders' surplus of $2,836,586,123. LMN Inc. has net written premiums in the amount of $9,852,239,444 and a policyholders' surplus of $3,552,453,811. Looking at these two insurers,

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Multiple Choice

The ABC Company has net written premiums in the amount of $4,123,892,369 and a policyholders' surplus of $2,836,586,123. LMN Inc. has net written premiums in the amount of $9,852,239,444 and a policyholders' surplus of $3,552,453,811. Looking at these two insurers,

In evaluating how aggressively an insurer uses its surplus to support premium writing, focus on the premium-to-surplus ratio. This shows how much net written premium is backed by each dollar of policyholders’ surplus. Calculate for each company: - ABC: 4,123,892,369 / 2,836,586,123 ≈ 1.45 - LMN: 9,852,239,444 / 3,552,453,811 ≈ 2.77 The company with the higher ratio is using its surplus more aggressively to leverage premium writing. LMN’s ratio is about 2.77, vs ABC’s about 1.45, so LMN is more aggressive and ABC is less aggressive in leveraging surplus. Since the question asks which is less aggressive, ABC fits that description. Surplus level matters for this comparison because the same amount of premium backed by a smaller surplus implies higher leverage, whereas the opposite indicates lower leverage.

In evaluating how aggressively an insurer uses its surplus to support premium writing, focus on the premium-to-surplus ratio. This shows how much net written premium is backed by each dollar of policyholders’ surplus.

Calculate for each company:

  • ABC: 4,123,892,369 / 2,836,586,123 ≈ 1.45

  • LMN: 9,852,239,444 / 3,552,453,811 ≈ 2.77

The company with the higher ratio is using its surplus more aggressively to leverage premium writing. LMN’s ratio is about 2.77, vs ABC’s about 1.45, so LMN is more aggressive and ABC is less aggressive in leveraging surplus. Since the question asks which is less aggressive, ABC fits that description. Surplus level matters for this comparison because the same amount of premium backed by a smaller surplus implies higher leverage, whereas the opposite indicates lower leverage.

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