Page 22 - PUBLIC BANK & AIA INSURANCE COMPANY

increasing in revenue can keep the ratio stable. Next, by keep focus on equity because it is
important for the company to ensure that they measure their growth by growth in equity more.

ASSET QUALITY RATIO

Asset quality ratio measures the degree of exposure to equity risk. To calculate this ratio, Equity
is divided by Total assets. This ratio indicates the proportion of total assets funded by equity

shareholders’ funds. A higher asset quality ratio is generally treated an indicator of sound financial
position from long term point of view, because it means that a large proportion of total assets is
provided by equity and hence the firm is less dependent on external sources of finance. Then, a

low ratio is a danger signal for long term lenders as it indicates a lower margin of safety available
to them. The calculated table ratio above show that AIA Insurance Company lower than Sun Life

Insurance Company which is 9.35% and 26.48% respectively. Meaning by that, Sun Life
Insurance Company is better than AIA Insurance Company. AIA Insurance Company should
manage their asset more effectively in order to avoid this problem.

UNDERWRITING RATIO

1. Expenses Ratio

Calculate the expenses ratio of an insurance company by dividing underwriting expenses by net
premium earned by the insurance company. The expenses ratio signifies an insurance company’s

efficiency before factoring in claims on its policies and investment gains or losses. Based on the
above calculated table ratio, both of the company recorded a positive percentage. AIA Insurance
Company lowers than Sun Life Insurance Company which is 20.39% and 33.25% for Sun Life

Insurance Company. It can be concluded that AIA Insurance Company is better because the lower
the expenses ratio the better, because it means more profits to the insurance company.

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