CAS Exam 6C Spring 2017, Question 13
Study guide: Exam 6C
The following information is available from the December 31, 2016 P&C-1 of a property and casualty insurance company. All amounts are in thousands of dollars ($000s).
Balance Sheet
| Current Year | Prior Year | |
|---|---|---|
| Cash | 5,000 | 4,000 |
| Bonds and Debentures | 40,000 | 45,000 |
| Common Shares | 2,600 | 2,000 |
| Real Estate | 12,000 | 14,000 |
| Agents and Brokers Receivables | 500 | 750 |
| Unearned Premiums Recoverable | 10,000 | 12,000 |
| Unpaid Claims and Adjustment Expenses Recoverable | ? | ? |
| Total Assets | 105,000 | 101,000 |
| Gross Unpaid Claims and Adjustment Expenses | 40,000 | 38,000 |
| Equity | 30,000 | 28,000 |
Income Statement
| Current Year | Prior Year | |
|---|---|---|
| Net Premiums Written | 44,000 | 47,000 |
| Decrease (Increase) in Net Unearned Premiums | 1,200 | 1,000 |
| Net Claims and Adjustment Expenses | 35,000 | 32,000 |
| Total Acquisition Expenses | 5,000 | 5,000 |
| General Expenses | 3,000 | 3,200 |
| Investment Income | 6,000 | 4,000 |
| Realized Gains (Losses) | (1,000) | 500 |
| Investment Expenses | 500 | 400 |
| Income Taxes – Total | 2,500 | 2,800 |
Net Leverage Ratio at the end of the current year = 260%
All of the company's reinsurance is placed with an unregistered reinsurer without collateral.
Part a (1.75 points)
Calculate each of the following ratios as at December 31, 2016.
- i. Investment Yield
- ii. Return on Equity
- iii. Return on Assets
- iv. Net Underwriting Leverage Ratio
Part b (1 point)
Based on the ratios calculated in part a. above, assess whether the company is in good financial health.
Part c (0.5 points)
Calculate the unpaid claims and adjustment expenses recoverable at the end of the current year.
Answer this question and see the worked solution