CAS Exam 6C Spring 2015, Question 26
Study guide: Exam 6C
A property and casualty insurance company has the following ratios as at December 31, 2014:
| Ratio | Value |
|---|---|
| Return on equity (using year-end 2014 Equity) | 11.6% |
| Return on revenue | 6.5% |
| Return on assets (using average assets) | 6.1% |
| Liabilities as a percentage of liquid assets | 142% |
| Net loss reserves to equity | 36% |
| Net underwriting leverage ratio | 60% |
Other financial information for 2014 (all amounts are in thousands of dollars ($000s)):
| Item | Amount |
|---|---|
| Net premium earned | 93,600 |
| Liquid assets | 128,000 |
| Net income | 19,970 |
- The company has no capital required for catastrophes or reinsurance ceded to unregistered insurers.
Part a (1 point)
Calculate the total non-liquid assets for the company as at December 31, 2014.
Part b (1 point)
Comment on the financial health of the company based on the liabilities as a percentage of liquid assets ratio and the net underwriting leverage ratio.
Part c (0.5 points)
Contrast return on equity and return on revenue in terms of what they are intended to measure.
Answer this question and see the worked solution