With these numbers in mind, the rating agency would immediately examine the company very carefully due to its extreme premium to surplus leverage ratio. In an extreme example, for illustrative purposes, if a company recorded $5 billion in insurance premiums and had $1 billion in surplus, the company would have a premium to surplus ratio of 5 to 1 or $5 billion of premium against $1 billion of surplus. Rating agencies are always monitoring insurance companies. Potentially such factors could take a rating from an A+ down to an A or a B. If it turns out that the claims actually paid for 1999 were $700 million - not $500 million - it is an indication to the rating agency that the company was not establishing sufficient reserves upon its initial evaluation of a claim. As the claims are paid out over time, A.M. Best ratios are calculated on how the claims are being paid by the Company. The $500 million in reserves represents the company's estimate of what it will take to settle all the claims that occurred in, say, the year 1999. Claims are not paid on the first day they are submitted to an insurance company, and, as a result, the company records a liability or a reserve for the expected ultimate amount that will be paid in the future for each claim. As another example, let's assume that in 1999, $500 million in reserves are recorded for future claim payments. The rating agencies constantly run different types of financial models, and, hence, companies must submit financial data to the rating agencies every quarter. Based upon historical data, rating agencies require premium to surplus leverage ratios, at the extreme, to be below 3 to 1.