New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter V - Rates And Rating Organizations
Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance
Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance
Subpart 166-2 - Discussion Of General Rules
Section 166-2.4 - Discussion of measurement of profitability

(a) Some theoreticians favor return on assets, and others favor return on earned premiums, as the proper method for reflecting the profitability of the insurance business. Each of these measures gives valuable information. Both assets and earned premiums are easily calculated, while net worth is more difficult to estimate. However, return on net worth is generally considered to be the measure most comparable to profitability standards used in other industries.

(b) The department's consultant estimates net worth by adjusting countrywide surplus for New York's underwriting results, and subtracting one half of income (again, adjusted for New York's underwriting results). This is a relatively simple formula, and provides a reasonable approximation of true net worth. However, there are numerous adjustments which arguably could be made to refine the formula. A more complex formula might be adopted as part of the department's periodic revision of this regulation, if such formula were demonstrably more accurate than the present calculation.