CAS Exam 9 Spring 2013, Question 9
Study guide: Exam 9
You are given the following information regarding an insurance company.
| Item | Value |
|---|---|
| Written Premium | $200 million |
| Loss | $150 million |
| Expense | $50 million |
| Surplus | $75 million |
| Target return on surplus | 15% |
| Client Retention | 90% |
| Risk-free interest rate | 5% |
Assume premium is collected and expenses are paid at the beginning of the year, and losses are paid at the end of the year.
Calculate the total economic value of the firm.
Part a (1.5 points)
Answer this question and see the worked solution