The term investment in affiliates in insurance represents stocks, bonds, collateral loans, and short term or interim investments in affiliated properties as well as real estate properties held by the business. Conversely, the phrase unaffiliated investments symbolizes stocks, bonds, mortgages, accrued interest, real estate, and cash. These investments characterize assets that are totally unaffiliated from the company as stated in the admitted assets’ exhibit. These do not include investment in affiliates and other real estate possessions held by the business.
Stocks refer to the original paid-in capital of a business either paid by stockholders or invested by the business’ founders. It functions as a form of security for the business creditors since it cannot be easily withdrawn by investors. A stock’s value and quantity may fluctuate as it is traded in the stock market.
Bonds refer to debt instruments that are issued for over a year to increase capital through borrowing. Cities, states, corporations, and the government typically sell bonds to raise its current capital. Bonds are viewed as a guarantee to pay off the interest in addition to the principal on its date of maturity.
A mortgage, on the other hand, stands for a debt instrument with a collateral as a security, composed of real estate properties wherein the borrower must pay back by way of fixed payment sets. These are employed by companies or individuals so that real estate purchases are accomplished without having to pay the whole purchase value forthrightly. “Claims on property”, or “liens against property”, are the other terms for mortgages.
In addition, an accrued interest means an interest amount either receivable or payable that was recognized although not yet received or paid. This occurs due to the variations in cash flow timing and measurement. This is calculated using the accrual method of accounting.
Real estate properties, alternatively, take in buildings, land improvements, and all other improvements to immovable properties.
Cash visibly signifies the physical form of money, which includes currency, coins, and banknotes. Cash in businesses represents current assets composed of currency and currency counterparts which can be utilized instantly.
An affiliate is an inter-company relationship of a company possessing less than the majority of the stock of another company. It is accounted for using the equity method of accounting. It can also be created when two different businesses are mutual subsidiaries of one larger business described as the parent company. To illustrate, assume S Company owns 30% of the voting stock of T Company. Here, T Company and S Company possess the affiliate relationship, and S Company may exercise significant influence excluding control over T Company’s operations.
Hence, unaffiliated investments take in the company’s interest to businesses in which it doesn’t have significant influence. Here, the insurance company is an independent body with no established relationship to others, either as subsidiaries, members, or subordinates.
The equity method of accounting is a way of initially recording an equity investment at cost. An adjustment is then made to reflect the share of the investor in the associate’s net assets.