Flashcards in IRIS Deck (17)

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1

## Equation and Normal range for GWP:PHS

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Equation: GWP/PHS

Normal range: Less than 900%

2

## Factors to consider if Ratio 1 is unusual

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-Compare to ratio 2

-LOB

-Profitability

-Direct vs assumed business

3

## Equation and normal range for NWP:PHS

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Equation: NWP/PHS

Normal range: Less than 300%

4

## Factors to consider if ratio 2 is unusual

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-If member of group or affiliates, what is the aggregate ratio?

-Profitability

-LOB

-Adequacy of reinsurance protection

5

## Equation and normal range for change in NWP

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Equation: (Current NWP - Prior NWP)/Prior NWP

Normal range: between -33% and 33%

6

## Factors to look into if change in NWP ratio is unstable

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-Are the assets properly valued & liquid enough to meet cash demands?

-Are the reserves adequate?

7

## Increased NWP does not necessarily mean there is a greater chance of insolvency, if it is accompanied by

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-Low NWP: PHS ratio (ratio 2)

-Adequate reserving (ratios 11, 12, 13)

-Profitable operations (ratios 5)

-Stable product mix

8

## Equation and normal range for surplus aid: PHS

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Equation: Surplus aid/PHS

Surplus aid = ceding commissions x sum of UEPR (non affiliates)

Normal range: Less than 15%

9

## Issues related to a high surplus aid ratio

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-It may indicate that management believes that surplus is inadequate

-Surplus aid may improve the results of the other ratios to such a degree that it conceals important areas of concern

10

## Equation and normal range for 2 yr overall operation ratio

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Equation: 2 yr loss ratio + 2 yr expense ratio + 2 yr investment ratio

Normal range: Less than 100%

11

## Equation and normal range for investment yield

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Equation: -2 x Net investment income earned/cash & invested assets between current & prior years

Normal range: Between 3 & 6.5%

12

## Equation and normal range for gross change in PHS

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Equation: change in PHS/ prior PHS

Normal range: between -10% and 50%

13

## Equation and normal range for change in adjusted PHS

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Equation: Change in adjusted PHS/Prior PHS

Change in adjusted PHS = change in PHS - change in surplus notes - capital paid in - surplus paid in

Normal range: Between -10% and 25%

14

## Equation and normal range for adjusted liabilities: Liquid assets

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Equation: Adjusted liabilities = Liabilities - Liabilities equal to deferred agent's balances

Liquid assets = liquid assets - investments in parents, subsidiaries and affiliates

Normal range: Less than 100%

15

## Equation and normal range for gross agents balances: PHS

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Equation: Gross agents balances in the course of collection/PHS

Normal range: Less than 40%

16

## Equation and normal range for 1 yr reserve development to PHS

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Equation: one year reserve development/prior PHS

Normal range: Less than 20%

17