The following summarizes the balance sheet and income statement for a property-casualty insurer. Numbers are in millions of dollars.Net income of $848 million for 2009 come from the following to which taxes have been allocated.Loss on underwriting activities, after tax……….$ 43Investment income and realized gains on investments, after tax…891In addition to net income in the income statement, unrealized losses on available-for-sale investments of $124 million were reported as part of other comprehensive income in the equity statement.a. Calculate the residual income from under writing activities for 2009. Use beginning-of year balance sheet numbers in the calculation and a required return of 9 percent.b. Value the equity under a forecast that the residual income from under writing will grow at 2 percent per year in thefuture.
The following summarizes the balance sheet and income statement