Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

CPCU540 > CPCU540 > Flashcards

CPCU540 Flashcards

1
Q

expense ratio

A

earned premium under GAAP

/ written premium under SAP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

combined ratio

A

[profitability]

loss ratio + expense ratio

loss ratio = (losses & LAE) / earned premium

expense ratio = earned premium under GAAP / written premium under SAP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

bond price

A

C(1+r) + C(1+r)^2 + … + C(1+r)^n + P(1+r)^n,

C = interest or coupon payment
P = principal repayment (face)
n = number of periods
r = discount rate or yield
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

variance

A

sum of squared differences

/ (n-1)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

coefficient of variation (CV)

A

standard deviation

/ mean

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

working capital

A

current assets - current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

acquisition economic gain

A

G = VAB - (VA + VB)
= VAB - (VA + purchase price of B),

VAB = value of combined companies A and B

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

weighted average cost of capital

A

WACC
= cost of equity * %e
+ cost of debt * %d

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

accounting equation

A

assets = liabilities + shareholder equity

shareholder equity aka
net worth
book value
surplus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

gross profit

A

sales - COGS

markup = gross profit / COGs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

comprehensive income

A

= net income

+ other income not included on income statement (e.g, unrealized gains/losses or foreign translation gains)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

paid-in capital

A

= par value of stock issued

+ additional capital over par value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

SAP Accounting equation (insurers)

A

total assets - nonadmitted assets

= liabilities + policyholder surplus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

future value

A

FVn = PV * (1 + r/m)^(n*m),

n = years
m = # times per year interest is paid
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

present value

A

PV = FVn / (1+r)^n,

n = number of periods
r = rate of return
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

investment rate of return

A

solve for r

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

ordinary annuity: future value

A

FVA = A * FVAF,

FVAC = FV factor from table
A = fixed periodic payment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

ordinary annuity: present value

A

PVA = A * PVAF,

PVAF = (1 - 1/(1+r)) * (1/r)
A = fixed periodic payment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

annuity relationships: ordinary vs due

A

FV(annuity due) = (1+r) * FV(ordinary annuity)

PV(annuity due) = (1+r) * PV(ordinary annuity)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

perpetuity present value

A

PVP = A / r,

A = periodic payment
r = discount rate

eg dividends on preferred stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

net present value

A

NPV
= PV(inflows) - PV(outflows)
= -Co + Ct(1+r)^(-t) + … + Cn(1+r)^(-n),

Co = beginning cash flow
Ct = cash flow at time t
r = discount rate
n = number of periods
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

payment for acquisition

goodwill

A

= book value + goodwill

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

cost of goods sold (COGS)

A

= beginning inventory
+ inventory additions
- ending inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

gross margin

A

= gross profit / gross sales

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
operating income
= gross profit - general operating expenses
26
net income
``` = revenue - expenses (including depreciation) + gains - losses - taxes ```
27
change in retained earnings
= net income - dividends
28
net profit margin
= net income / sales
29
equity multiplier
= total assets / shareholder equity
30
premium-to-surplus ratio
[capacity] = written premiums net of reinsurance / policyholder surplus
31
reserves-to-surplus
[capacity] = (loss & LAE reserves + unearned premium reserves) / policyholder surplus
32
return on policyholder surplus ratio
= net income / surplus if net income < 0, then ratio = 0%
33
current ratio
= current assets | / current liabilities
34
debt-to-equity ratio
= long-term debt | / shareholder equity
35
earnings per share
EPS = net income / common shares outstanding
36
return on equity (ROE)
= net income / shareholder equity = net income / capital = ROA * equity multiplier net income = earnings after bond issue: net income = earnings - interest owed
37
return on assets (ROA)
= net income / total assets = net profit margin * asset turnover ratio = (net income / sales) * (sales / total assets) = efficiency of controlling expenses * efficiency in use of assets
38
debt-to-assets ratio
= total liabilities | / total assets
39
DuPont Identity (return on equity)
= net income / sales * sales / total assets * total assets / equity
40
earned premium
= this year's written premiums + unearned premium reserves - unearned premium reserve @ end of last year
41
loss expenses
= losses paid during year + ending reserves - beginning reserves
42
liquidity ratio
= (bonds + stock + cash + interest + short-term investments) | / (loss & LAE reserves + unearned premium reserve)
43
operating ratio
[profitability] = combined ratio - investment income ratio
44
investment yield rate
= net investment gain/loss | / total cash invested assets
45
capital gain
= market price @ maturity - purchase price
46
annual RoR (bond)
= interest + capital gain | / price @ beginning of year
47
annual RoR (stock)
= dividend + capital gain | / share price @ beginning of year
48
accounts receivable turnover
= credit sales | / accounts receivable
49
days sales outstanding
= 365 / accounts receivable turnover ratio
50
asset turnover
= sales | / total assets
51
inventory turnover
= COGS | / inventory
52
acid-test (quick) ratio
= (cash + marketable securities + accounts receivable) | / current liabilities
53
insurance leverage
= insurance exposure * (reserves / premiums written) | OR reserves / surplus) = (premiums / surplus) * (reserves / premiums
54
new value of shares purchased from acquired company
= (# acquired shares / new total shares) * Vab, Vab = value of combined company
55
market value surplus (risk adjusted surplus)
MVS = fair value assets - fair value liabilities = fair value assets - present value liabilities + market value margin
56
cost of preferred stock capital
Kps = D / P, ``` D = dividend per share P = market price per share of preferred stock ``` estimate cost of debt/capital
57
cost of debt
Kd = (rf + risk premium) * (1 - T) = (interest rate on debt)*(1-T), ``` rf = risk free rate T = tax rate 1-T = tax shield ```
58
capital asset pricing model (CAPM) cost of equity (insurer)
Ke = rf + B*(rm - rf), ``` rf = risk free rate B = beta of security rm = expected market rate ```
59
discounted cash flow model (DCF) cost of equity (insurer)
Ke = g + [d/P * (1+g)], ``` g = expected growth rate of dividend in perpetuity d = last annual dividend P = current share price ```
60
cost of capital from insurer operations cost of funds
Kc = [(1 - T) * U] / [LR + PR], ``` T = tax rate U = underwriting loss LR = loss & LAE reserves PR = unearned premium reserve ```
61
loss ratio
= (losses & LAE) | / earned premiums
62
Securities & Exchange Commission Filings: annual 10-K
large accelerated filers (>$700M public float) -- 60 days accelerated filers (> $75M public float) -- 75 days nonaccelerated filers -- 90 days
63
Securities & Exchange Commission Filings: quarterly 10-Q
accelerated filers (>$75M public float) -- 40 days nonaccelerated filers -- 45 days
64
Securities & Exchange Commission Filings: 8-K
within 4 days of triggering event
65
SEC company annual report | required sections
``` financial statements and notes auditor's report report of management management's discussion and analysis of results of operations and financial condition selected financial data ```
66
vertical analysis
common size statement two or more companies looks for unusual % that identify items that have an excessively large/small value when compared with competitors or a benchmark
67
ratio analysis
comparison to expectations
68
T bills
maturity <= 1 year, sold at discount to face value, repaid at face value
69
T notes
maturity 2-10 years, stated coupon rate, pay coupons X2 per year
70
T bonds
maturity 30 years, stated coupon rate, pay coupons x2 per year
71
treasury inflation protected securities (TIPS)
maturity 5, 10, or 20 years, pay coupons x2 per year. The principal is tied to inflation (CPI). If inflation increases, the principal increases.
72
eurobonds
maturity 3-7 years
73
risk based capital requirements
no action if insurer's capitalization level > 200% company action level < 200% --> comprehensive financial plan regulator action level < 150% --> examination & comprehensive financial plan authorized control level < 100% --> insurer may be placed under control mandatory control level < 70% -> insurer placed under control
74
soft market
more sellers than buyers
75
price of common stock
price = dividend at next dividend date / (rm - dividend growth rate), rm = market rate of return
76
liquidity ratio
= liquid assets / | (loss & LAE and unearned premium reserves)
77
market breadth
The percentage of the overall market that is participating in the market.

CPCU540 (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions