CAS Exam 6C Spring 2016, Question 23
Study guide: Exam 6C
You are provided with the following select information from an insurance company's December 31, 2015 P&C-1. All amounts are in thousands of dollars ($000s).
| Assets | Current Year | Prior Year |
|---|---|---|
| Total Investments | 400,000 | 380,000 |
| Recoverable from Reinsurers: Unearned Premiums | 50,000 | 40,000 |
| Recoverable from Reinsurers: Unpaid Claims and Adjustment Expenses | 150,000 | 135,000 |
| Total Assets | 700,000 | 670,000 |
| Liabilities | Current Year | Prior Year |
|---|---|---|
| Payables: Agents and Brokers | 2,500 | 1,500 |
| Payables: Policyholders | 1,000 | 1,000 |
| Payables: Other Insurers | 10,000 | 9,000 |
| Unearned Premiums | 100,000 | 80,000 |
| Unpaid Claims and Adjustment Expenses | 400,000 | 350,000 |
| Unearned Commissions | 4,000 | 3,000 |
| Total Liabilities | 600,000 | 550,000 |
| Statement of Income | Current Year | Prior Year |
|---|---|---|
| Premiums Written: Direct | 250,000 | 170,000 |
| Premiums Written: Reinsurance Assumed | 150,000 | 130,000 |
| Premiums Written: Reinsurance Ceded | 100,000 | 80,000 |
| Underwriting Income (Loss) | (120,000) | (100,000) |
| Net Investment Income | 105,000 | 80,000 |
| Total Income Taxes | (5,000) | (5,000) |
| Net Income (Loss) for the Year | (20,000) | (25,000) |
The company has no income from subsidiaries or any investment income gains.
Part a (1 point)
Calculate the following key financial indicators as of December 31, 2015:
- i. Return on Equity
- ii. Return on Revenue
- iii. Net Loss Reserves to Equity
- iv. Return on Assets
Part b (1.25 points)
Based on the indicators calculated in part a. above, comment on the company's financial health.
Answer this question and see the worked solution