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Flashcards in IRIS Deck (17):
1

Equation and Normal range for GWP:PHS

Equation: GWP/PHS
Normal range: Less than 900%

2

Factors to consider if Ratio 1 is unusual

-Compare to ratio 2
-LOB
-Profitability
-Direct vs assumed business

3

Equation and normal range for NWP:PHS

Equation: NWP/PHS
Normal range: Less than 300%

4

Factors to consider if ratio 2 is unusual

-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

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

-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

-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

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

-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

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

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

Equation: change in PHS/ prior PHS
Normal range: between -10% and 50%

13

Equation and normal range for change in adjusted PHS

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

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

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

Equation: one year reserve development/prior PHS
Normal range: Less than 20%

17

Equation and normal range for estimated current reserve deficiency to PHS

Equation: Deficiency/PHS
Reserves required = premiums earned x ratio of reserves: premium
Normal range: Less than 25%