A10. Odomirok 18 Flashcards Preview

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Flashcards in A10. Odomirok 18 Deck (12):
1

When does the IEE need to be filed

4/1 following the Annual Statement date.

2

List the 3 parts of the IEE

1. Part 1: Allocation of other underwriting expenses
2. Part 2: Allocation of pretax profit by line, on a net basis
3. Part 3: Allocation of pretax profit by line, on a direct basis

3

What categories are expenses divided into in Part 1 of the IEE

-LAE

-Other Underwriting Expenses (further allocated into Acquisition, Field Supervision and Collection Expenses/General Expenses/ Taxes, Licenses and Fees)

-Investment Expenses

4

List some uses of the IEE

-Regulators: monitor the financial health of the insurer. It may indicate trends by line of business may threaten the solvency of the entire insurer

-Regulators: monitor rate adequacy.

-Stakeholders: determine the lines that were profitable, and use this knowledge to help make business decisions

-Investors: help determine how much to invest in the insurer

-Actuaries: source of premium, losses and expenses for benchmarking

5

What is surplus allocated proportional to

Mean net loss and LAE reserves + Mean UPR + EP for the year

6

What categories does the IEE divide the investment gain into

-Investment Gain on Funds Attributable to Insurance Transactions

-Investment Gain Attributable to Capital and Surplus

7

Equation for Investment gain on funds attributable to insurance
transactions

=Investment gain ratio * Funds attributable to insurance transactions for the line

Where the funds attributable to insurance transactions for each line:
=Mean net loss and LAE reserves + Mean UPR * [1 - (prepaid expenses / written prem)] - (Mean net agents' balances. - ceded reinsurance premiums payable)

8

Equation for Investment gain ratio

= Net investment gain / Total investable assets

Where Total investable assets = Mean net loss and LAE reserves + Mean net unearned premium reserves + Mean ceded reinsurance premiums payable + Mean policyholders'
surplus - Mean agents' balances

9

Formula for Total Investment Gain

=company's investment gain ratio * investable funds associated with the LOB

Where investable funds associated with the LOB = Mean net loss and LAE reserves + Mean UPR - Mean net agents' balances + Ceded reinsurance premiums payable + Allocated
PHS.

10

Formula for Prepaid Expenses

Commission and Brokerage expenses incurred + Taxes, licenses and fees incurred + Other acquisition, field supervision and collection expenses + (1/2) * general expenses incurred

11

IEE as a profitability measure

Best used as a retro measure of profitability. Should not be used for pricing, as it is based on historical reserves as opposed to future potential reserves

12

Wny no allocation of income for Part III?

Part 3 is on a direct basis. Companies do not hold assets on a direct basis and therefore it is an artificial measure that does not generate investment income.