CIA Taxes

Question 1

How “Future tax temporary difference” arise?

Answer 1

Represents the prepayment tax as a result of the liability deducted for tax purpose being less than the amount reported on the balance sheet

Question 2

Formula of Income Tax Deduction, Estimated Effect of Discounting the Asset for Future Income Taxed, Present Value Factor

Answer 2

Income Tax Deduction = 95% * Min(Reported Reserves, APV)

Estimated Effect of Discounting the Assets for Future Income Taxes =
(Reported Reserves - 95% * Min[Reported Reserves, APV])
* Future Income Tax Rate
* (1- Present Value Factor)

where PVF = (Discounted e/x PfADs + PfADs for Investment Return Rate)/Undiscounted estimate

Note: Reported Reserves & APV should be net of recoverable from Reinsurance, S&S

Question 3

Formula of Discounted Loss Ratio

Answer 3

Discounted Loss Ratio =
(Paid + APV - Investment Income from UCR)/
(Premium + Investment Income from UPR)

where Investment Income from UCR = yield rate * (APV/2)