Calendar Year Experience

Categories: Accounting, Metrics

We all have experiences that make some years more memorable than others. (Brief moment while we stare off into space remembering the summer between high school and college...) But a calendar year experience from an insurance company's point of view is basically subtracting expenses from revenue.

Revenue comes in the form of premiums paid by their policyholders and expenses are the claims the company had to pay throughout the year.

So let's say Avoid a Bad Nursing Home Inc. collects premiums of $6 million for long term care insurance throughout the calendar year of January 1 through December 31. Now that all the baby boomers are getting older, Avoid a Bad Home had to pay out $4 million in claims for assisted living and in-home care. So their calendar year experience is $6 million minus $4 million, equaling $2 million. Given that the result is positive, Avoid a Bad Home is doing a decent job in selecting those they are willing to insure and pricing their premiums appropriately.

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Finance: What is a Fiscal Year v. Calend...28 Views

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Finance allah shmoop what is a fiscal year versus a

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calendar year Well let's start with the latter calendar year

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that's this thing It starts january one with a hangover

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and ends at midnight December thirty one with a big

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fat ball dropping in new york No this thing different

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ball paul's Never All right So that's a calendar year

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and okay so what is a fiscal year And how

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is it different from a calendar year Well it isn't

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always different Actually a fiscal year just refers to the

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one year period in which companies track and report their

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financial story Some companies report from january one to december

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thirty one right like their fiscal year maps on top

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of the calendar year But in some cases this reporting

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system was misleading or problematic for investors Why All right

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Well let's take macy's please They used to be somebody

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Somebody They had parades and white flower day sales and

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people used to actually go to their stores So macy's

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did some huge percentage of its sales for the year

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right around christmas And before you know computers were really

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a thing it often took weeks or months toe fairly

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And accurately add everything up so macy's among others decided

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to change their fiscal year They were powerful back then

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so you know they could do things like that So

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they moved their year to run from july one until

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june thirty that is that became their fiscal year it's

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still a year still three hundred sixty five days still

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everything the same With the exception of the start and

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end points this way When things were relatively quiet at

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the end of june the macy's bean counters could properly

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count their year end beans in relative peace and harmony

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Having caught up from the day luge of frenzied christmas

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sales it gets even more complex in that some companies

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wanted to be fully off kilter for any comparable calendar

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years Oracle the database company for example is one of

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them Savvy buyers of databases would wait until just before

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the quarter ended for oracle hoping to negotiate better rates

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in renting their database needs It was dangerous for a

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company to miss its quarter with so much competition in

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silicon valley from startups to steal those precious engineers from

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big companies and put him into running a startups You

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know big companies and they paid in cash and modest

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stock options You can't really get rich these days working

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at oracle if oracle ever missed a quarter while it

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would hemorrhage engineers to the venture capital people hovering in

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the hallways so oracle moved its fiscal ofthe month I'ii

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february may august november kind of vibe so that wouldn't

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be quite as held hostage by those savvy database renters

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hoping for a macy style midnight white flower day sale

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Now that's something worthy of a parade There's a database 00:03:00.715 --> [endTime] parade

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