CAS Exam 6C Fall 2016, Question 22
Study guide: Exam 6C
The following information is available for a property and casualty insurance company for the last two years. This information was obtained from the company's annual return. The company has no subsidiaries. All amounts are shown in thousands of dollars ($000s):
| Item | 2015 | 2014 |
|---|---|---|
| Gross Written Premium | 265,000 | 250,000 |
| Gross Earned Premium | 252,000 | 240,000 |
| Ratio of Net Premium Written to Gross Premium Written | 0.80 | 0.75 |
| Total Investment Income | 5,550 | 7,500 |
| Underwriting Income (Loss) | 9,500 | 3,900 |
| Realized Gains (Losses) | 1,500 | 2,750 |
| Net Income for the Year (After Income Taxes) | 11,600 | 11,000 |
| Other Comprehensive Income for the Year | 1,000 | 500 |
| Dividends | 5,000 | 5,000 |
| Total Assets | 330,000 | 320,000 |
| Total Liabilities | ? | 196,000 |
| MCT Ratio | 180% | 235% |
| MCT Ratio Internal Target | 175% | 175% |
Part a (1.5 points)
Calculate each of the following ratios as at December 31, 2015.
- i. Return on Equity
- ii. Return on Revenue
- iii. Net Underwriting Leverage
Part b (1.25 points)
Using the information provided and the ratios calculated in part a. above, assess the financial health of the company as at December 31, 2015.
Answer this question and see the worked solution
Concepts tested
- MSA Ratios
- Financial Health
- Internal Target Capital Ratio
- Key Financial Measures
- Statement of Changes in Equity