PUNZALAN, ELOISA

BSBA 3FM

I. Essay
I.1 Define/ explain the three types of investment companies 10pts
1. SHARES- hares are a sort of growth investment since they can help you expand your
initial investment over time. If you own stock, you may earn dividends, which are
essentially a percentage of a company's profit distributed to its shareholders.
Furthermore, the value of your stock may fall below the price at which you bought
it. Shares are best suited to long-term investors who can tolerate the ups and downs
because prices can change substantially from day to day. Shares, sometimes known
as equities, have historically outperformed other investments. Shares, on the other
hand, are one of the riskiest investments.
2. PROPERTY- Property is also known as a growth investment since the price of houses
and other assets can rise dramatically over a medium to long period of time.
Property, like equities, has the potential to lose value and is therefore risky. You can
purchase a home directly or indirectly through a property investment fund.
3. FIXED INTEREST- Bonds are the most well-known fixed-interest investments, and they
entail governments or businesses borrowing money from investors and repaying it with
interest. Bonds are also considered a defensive investment because they offer lower
potential profits and fewer risk than stocks or real estate. They can also be sold quickly,
much like cash, but capital losses are possible.

1.2 Enumerate/Discuss the different sources of revenue for an insurance company and
give example for each

For insurance companies, underwriting revenues come from the cash collected on insurance policy
premiums, minus money paid out on claims and for operating the business. For instance, let's say EP
Insurance Corporation earned 5 million from the paid out by customers for their policies in a year's time.
Let's also say that EP Insurance Corp. paid 4 million in claims in the same year. That means on the
underwriting side, EP Insurance earned a profit of 1 million (5 million minus 4 million = 1 million). Make
no mistake, insurance company underwriters go to great lengths to make sure the financial math works
in their favor. The entire life insurance underwriting process is very thorough to ensure a potential
customer actually qualifies for an insurance policy. The applicant is vetted thoroughly and key metrics
like health, age, annual income, gender, and even credit history are measured, with the goal of landing
at a premium cost level where the insurance company gains maximum advantage from a risk point of
view. That's important, as the insurance company underwriting business model ensures that insurers
stand a good chance of making additional income by not having to pay out on the policies they sell.
Insurance companies work very hard on crunching the data and algorithms that indicate the risk of
having to pay out on a specific policy. If the data tells them the risk is too high, an insurer either doesn't
offer the policy or will charge the customer more for offering insurance protection. If the risk is low, the
insurance company will happily offer a customer a policy, knowing that its risk of ever paying out on that
policy is comfortably low.