What does "financial analysis" involve with insurance companies?

Financial analysis in the context of insurance companies primarily involves assessing an insurer's financial statements for solvency and profitability. This process is crucial for regulators, stakeholders, and investors as it provides insights into the company's ability to meet its obligations and withstand financial challenges. By analyzing financial statements, one can evaluate key metrics such as reserves, claims liabilities, investment income, and operating expenses. This assessment helps in determining whether an insurer is financially stable enough to pay out future claims and sustain operations, which is vital for both customer trust and regulatory compliance.

The other options focus on different aspects of insurance operations. Identifying customer demographics relates to market analysis for new policy development, which, while important, does not pertain directly to the financial health of the company. Evaluating an insurer's social impact and community involvement speaks to its corporate social responsibility rather than its financial viability. Reviewing policy coverage limits and terms is important for underwriting and customer service but does not directly address financial performance or sustainability. Thus, the focus of financial analysis is distinctly centered on an insurer's financial health, clarifying why the chosen answer is the most accurate representation of what financial analysis entails.