MSA Ratios

Question 1

Provide the following for the MCT RATIO:

• Formula
• Acceptable Range
• Meaning

Answer 1

F: 1.5 x CapAv / CapReq
A: >150% = good
M: measure of capital adequacy

Question 2

Provide the following for the ROE:

• Formula
• Acceptable Range
• Meaning

Answer 2

F: NetIncome / Equity
A: >5.4% = good
M: return to shareholder per unit of capital

Question 3

Provide the following for the ROR:

• Formula
• Acceptable Range
• Meaning

Answer 3

F: (U/W income - CapGains + InvInc + IncFromSubsidiaries) / GWP
A: >6.2% = good
M: income relative to revenue generating capacity

Question 4

Provide the following for the ROA:

• Formula
• Acceptable Range
• Meaning

Answer 4

F: NetIncome / avg(Total Assets)
A: >2.6% = good
M: efficiency measure for income generation

Question 5

Provide the following for the Liabs to Liquid Assets:

• Formula
• Acceptable Range
• Meaning

Answer 5

F: Liabilities / LiquidAssets
A: <105% = good
M: liquidity measure

Question 6

Provide the following for the Net Loss Reserves to Equity:

• Formula
• Acceptable Range
• Meaning

Answer 6

F: NetLossRes / Equity
A: <200% = good
M: high ratio could mean financial distress

Question 7

Provide the following for the Net Leverage Ratio:

• Formula
• Acceptable Range
• Meaning

Answer 7

F: (NWP + Net Liabs) / Equity
A: <500% = good
M: stability measure (high ratio means excessive writing)

Question 8

Provide the following for the Adj. Investment Yield:

• Formula
• Acceptable Range
• Meaning

Answer 8

F: 2x( NetInvIncome + OCI) / (InvAssets(B) + InvAssets(E) - NetInvIncome - OCI)
A: N/A
M: measures income and capital gains relative to assets

Question 9

Provide the following for the U/W Net Leverage Ratio:

• Formula
• Acceptable Range
• Meaning

Answer 9

F: NWP / Equity
A: <300% = good
M: a higher ratio indicates capital strain