CAS Exam 6C Fall 2015, Question 22
Study guide: Exam 6C
You are given the following information about a property and casualty insurance company. All amounts are in thousands of dollars ($000s).
| December 31, 2013 | December 31, 2014 | |
|---|---|---|
| Net Premiums Written | 50,000 | 53,000 |
| Net Premiums Earned | 49,000 | 51,500 |
| Net Claims and Adjustment Expenses | 29,400 | 38,625 |
| Operating Expenses | 12,250 | 12,875 |
| Investment Income | 1,600 | 2,000 |
| Realized Gains (Losses) | 1,600 | 250 |
| Investment Expenses | 200 | 250 |
| Other Revenue Net of Other Expenses | 0 | 0 |
| Other Comprehensive Income | 1,000 | (2,000) |
| Income Taxes | 2,795 | 540 |
| Equity | 20,000 | ? |
| MCT Ratio | 225% | 205% |
Part a (0.75 points)
Calculate the equity as at December 31, 2014.
Part b (0.75 points)
Calculate the following year-end 2014 financial ratios:
- i. Return on equity
- ii. Underwriting leverage ratio
- iii. Net combined ratio
Part c (1 point)
Comment on the company's financial health as at December 31, 2014 based on the information provided and the answer in part b. above.
Answer this question and see the worked solution
Concepts tested
- MSA Ratios
- Key Financial Measures
- Combined Ratio
- Financial Health
- Net Income
- Statement of Changes in Equity