CAS Exam 9 Spring 2017, Question 24
Study guide: Exam 9
For a line of business, the Underwriting Profit Provision is determined using a Risk-Adjusted Discounted Cash Flow (RA DCF) method.
Long-term growth and profitability targets are:
- Financial statement ROE: 15%
- Yearly growth target: 10%
Part a (1 point)
Briefly discuss two advantages of the RA DCF method, and identify whether each advantage helps to achieve the above targets.
Part b (1 point)
Recommend an alternate Underwriting Profit Provision approach that addresses both targets. Describe how the recommended approach addresses the targets.
No current syllabus covers this question; it is kept for the record.
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