STW Insurance Corp. Balance Sheet Period Ended 12/31/2012
Data displayed in $000 unless otherwise noted
Assets
Investments:
Bonds
Preferred Stocks
Common Stocks
Mortgage Loans
Real Estate
Contract Loans
Derivatives
Cash & Short Term Investments
Other Investments
Total Cash & Investments 1,560,321 350,116 0 9,480 0 43,256 1,000 1,964,173
Premiums and Considerations Due
Reinsurance Recoverable
Receivable from Parent, Subsidiary or Affiliates
All Other Admitted Assets
Total Assets 95,576 13,238 10,046 41,950 2,124,983
Liabilities
Loss Reserves
Loss Adjustment Expense Reserves
Total Loss & LAE Reserves 729,927 142,700 872,626
Unearned Premium Reserve
Total Reinsurance Liabilities
Commissions, Other Expenses, and Taxes due
Derivatives
Payable to Parent, Subs or Affiliates
All Other Liabilities Total Liabilities 268,267 16,280 47,816 0 6,491 69,200 1,280,681
Capital and Surplus
Common Capital Stock
Preferred Capital Stock
Surplus Notes
Unassigned Surplus
Other Including Gross Contributed
Capital & Surplus 12,500 0 586,840 244,961 844,302
Total Liabilities and C&S 2,124,983 10
STW specializes in workers' compensation coverage. The investments behind the insurer's surplus are mostly short-term bonds, but STW has moved its investments from short-term bonds to common stocks in the recent years. Market conditions are favorable for it to write business. Given this situation, should you recommend STW to increase or decrease its reinsurance purchase? Briefly explain your option.