Adjusted Liabilities
It's an insurance industry term. Insurance companies are liable for the damages they cover. They have assets...usually invested in bonds and stocks. And there is a kind of minimum coverage ratio they must maintain for the assets they have relative to the total liabilities they might suffer if, in fact, that earthquake and pestilence that goes with it...all happen.
They have a maintenance reserve, i.e. a basic 'always having to pay' maintenance amount for regular claims that happen all the time; and then there's an asset reserve...like if they have to sell off assets to pay for Johnny's very poor car parking job that ended with the SUV in the pool.
Why do these ratios matter? Because they reflect how financially healthy an insurance company is. The numbers are used for both investors and, for some, marketing. That is, if you're buying some form of variable life insurance policy, which is likely not to trigger for 25 years when you drive your Ferrari into a wall...you want to be sure that your insurance company is around, so that your grandkids have at least something. A financially strong insurance company should give policy-buyers at least some comfort in The Long Cold Sleep coming.
Related or Semi-related Video
Finance: What is liability?3 Views
Finance allah shmoop What is a liability What is it
it's what you owe you bought four million gumballs on
credit for your party pack for the parade the money
is owed to gumballs are us in ninety days that's
a short term liability Alright next example you borrowed eighty
three million dollars to set up your new do dental
drive through service and that money is due in twelve
years at seven percent interest a year that's A long
term liability Why long term Because it comes due in
over a year and that's basically it liability comes in
two flavors short and long term and it's one of
the key elements of the balance sheet as it lives
in this space ride over here So yeah that's a
liability all this crap time now considering how many gumballs
you've consumed in the past month you really should get
yourself to a good drive through dentist or maybe sleep 00:00:56.998 --> [endTime] in mr
Up Next
What is Contingent Liability? Contingent liability refers to a possible liability in the future contingent upon some other event being the trigger....
What are accounts receivable and accounts payable? Accounts receivable and payable are figures that show up on a company’s balance sheet. Account...