CAS Exam 6C Fall 2014, Question 23
Study guide: Exam 6C
The following selected information is provided for a property and casualty insurance company's annual return over the last two years. All amounts are in thousands dollars ($000s).
| Item | 2013 | 2012 |
|---|---|---|
| Gross Premium Written | 61,000 | 59,000 |
| Gross Premium Earned | 60,000 | 58,000 |
| Ceded Premium Earned | 7,000 | 6,500 |
| Underwriting Income | 6,200 | 250 |
| Net Income (Loss) before Income Taxes | 12,700 | 8,550 |
| Realized Gains (Losses) | 500 | 300 |
| Total Investment Income | 6,000 | 8,000 |
| Income from Subsidiaries | 200 | 200 |
| Total Tax | 4,150 | 2,800 |
| Total Assets | 170,000 | 168,000 |
| Net Loss Reserves | 105,000 | 100,000 |
| Equity | 40,000 | 36,000 |
Part a (3 points)
Calculate each of the following ratios as at December 31, 2013. Provide a brief description of each ratio and note the acceptable ranges for each ratio.
- i. Return on Equity
- ii. Return on Revenue
- iii. Return on Assets
- iv. Net Loss Reserves to Equity
Part b (1 point)
Using the ratios calculated in part a. above, opine on the financial health of the company as at December 31, 2013.
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