CAS Exam 6C Spring 2014, Question 17
Study guide: Exam 6C
The following is a partially completed Unpaid Claims and Loss Ratio Analysis Exhibit for an insurance company. All amounts are in thousands of dollars ($000s).
| Accident Year (01) | Paid Loss Cumulative (03) | Total Undiscounted Unpaid Claims and Adjustment Expense (06) | Present Value of Unpaid Claims and Adjustment Expenses – Total (07) | PFAD Claims (08) | PFAD Reinsurance (10) | PFAD Interest Rate (11) |
|---|---|---|---|---|---|---|
| 2011 | 1,800 | 600 | 591 | 44 | 0 | 2 |
| 2012 | 1,200 | 1,500 | 1,460 | 110 | 0 | 10 |
| Accident Year (01) | Discounted Reserves including PFAD (12) | Earned Premium (13) | Investment Income from UPR (14) | Cumulative Investment Income from Unpaid Claim Reserve (15) | Loss Ratio Undiscounted (16) | Loss Ratio Discounted (17) |
|---|---|---|---|---|---|---|
| 2011 | 637 | 4,500 | 12 | 13 | ?? | ?? |
| 2012 | 1,580 | 5,000 | 14 | ?? | ?? | ?? |
Additional information is also available:
- Investment Yield for 2012 = 4%
- Future income tax rate = 35%
- Net claims liabilities amount carried in the balance sheet = 2,500
- There are no reserves related to accident years prior to 2011
Part a (1.75 points)
Calculate the Undiscounted and Discounted Loss Ratio (columns 16 and 17) for accident years 2011 and 2012.
Part b (1.5 points)
Calculate the estimated effect of discounting the asset for future income taxes.
No current syllabus covers this question; it is kept for the record.
Answer this question and see the worked solution
Concepts tested
- Canadian Annual Return
- Future Income Tax Asset
- Loss Ratio
- Loss Reserve Discounting
- Margin for Adverse Deviations