CAS Exam 6C Fall 2017, Question 25
Study guide: Exam 6C
The following information is available from a property and casualty insurance company's Annual Return as at December 31, 2016. All amounts are in thousands of dollars ($000s).
| Item | Amount |
|---|---|
| Total assets | 112,000 |
| Total liabilities | 90,000 |
| Gross premiums written | 70,400 |
| Net premiums written | 67,900 |
| Decrease (increase) in net unearned premiums | (2,000) |
| Net incurred claims and operating expenses | 63,500 |
| Investment operations – income | 1,500 |
| Investment operations – realized gains (losses) | 1,000 |
| Investment operations – expenses | 400 |
| Share of net income from subsidiaries | 1,800 |
Other information:
- The company has never had any premium deficiencies, other comprehensive income, or service charges nor any other adjustments in determining its total underwriting revenue.
- 70% of the company's investment income and expenses was attributable to underwriting-related activities.
- The company's return on assets after tax was 2.73%.
- The company's adjusted investment yield (including gains/losses) was 1.93%.
Part a (1.5 points)
Calculate the company's return on equity in 2016.
Part b (1.5 points)
Calculate three metrics other than the ones mentioned above that can be used to evaluate the company's financial strength.
Part c (1 point)
Given your answers to parts a. and b. above, comment on the financial strength of the company.
Answer this question and see the worked solution