CAS Exam 6C Fall 2018, Question 24
Study guide: Exam 6C
The following information is available for a property and casualty insurance company. All amounts are in thousands of dollars ($000s).
| Page 20.10 Assets | 2017 | 2016 |
|---|---|---|
| Recoverable from Reinsurers: Unearned Premiums | 5,000 | 4,000 |
| Recoverable from Reinsurers: Unpaid Claims and Adjustment Expenses | 8,000 | 7,000 |
| Page 20.20 Liabilities and Equity | 2017 | 2016 |
|---|---|---|
| Unpaid Claims and Adjustment Expenses | ? | 132,000 |
| Total Liabilities | 280,000 | 255,000 |
| Accumulated Other Comprehensive Income | 2,000 | 1,800 |
| Total Equity | ? | 75,000 |
| Page 20.30 Statement of Income | 2017 | 2016 |
|---|---|---|
| Net Premium Written | 100,000 | 90,000 |
| Net Premium Earned | 90,000 | 80,000 |
| Ceded Premium Written | 10,000 | 9,000 |
| Ceded Premium Earned | 8,900 | 7,900 |
| Net Claims and Adjustment Expenses | 60,000 | 52,000 |
| Underwriting Income (Loss) | 11,000 | (20,000) |
| Realized Gains (Losses) | 500 | 1,000 |
| Net Investment Income | 2,500 | (3,000) |
| Other Revenue and Expenses | 1,100 | 1,000 |
| Total Income Taxes | 4,200 | (20,000) |
| Page 30.61 MCT Ratio | 2017 | 2016 |
|---|---|---|
| Total Capital Available | 74,000 | 66,000 |
| Total Capital Required at Target | 38,000 | 32,000 |
| From other pages | 2017 | 2016 |
|---|---|---|
| Net Paid Losses | 42,000 | 35,000 |
The company has established its internal MCT target at 220%. The company does not pay any dividend in 2017.
Part a (1 point)
Calculate the following:
- i. Net income (loss) for fiscal year 2017
- ii. Total equity as of December 31, 2017
- iii. MCT ratio as of December 31, 2017
- iv. Net unpaid claims and adjustment
Part b (2 points)
Calculate each of the following key financial indicators as of December 31, 2017:
- i. Return on revenue
- ii. Return on equity
- iii. Net loss reserves to equity
- iv. Overall net leverage
Part c (1 point)
Using the information provided and the ratios calculated in parts a. and b. above, comment on the financial health of the company as at December 31, 2017.
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