Changes in policyholder surplus are the annual changes in the assets of a mutual insurance company, minus its liabilities. Changes in policyholder surplus can provide an indication of how well an insurance company is performing relative to the previous year. Regulatory agencies commonly use it as a metric to evaluate insurance companies.
A mutual insurance company's assets can include investment gains, operating earnings, and contributed capital. To calculate the policyholder surplus, the insurance company's total liabilities are subtracted by its total assets for the period. If this number goes down significantly from one year to the next, it can indicate that the insurance company is in financial trouble. If an insurance company's change in policyholder surplus is very significant (on the negative side) it could face a review from the National Association of Insurance Commissioners (NAIC).
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