# IRIS Flashcards

Equation and Normal Range for GWP: PHS

Equation: GWP/PHS

Normal Range: < 900%

Factors to consider if Ratio 1 is unusual:

- compare to Ratio 2
- line of business
- profitability
- direct vs assumed business

Equation and Normal Range for NWP: PHS

Equation: NWP/PHS

Normal Range: < 300%

Factors to consider if Ratio 2 is unusual:

- if member of group of affiliates, what is the aggregate ratio?
- profitability
- line of business
- adequacy of reinsurance protection

Equation and Normal Range for Change in NWP

Equation: [Current NWP - Prior NWP] / Prior NWP

Normal Range: Between -33% and 33%

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?

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 (Ratio 5)
- stable product mix

Equation and Normal Range for Surplus Aid: PHS

Equation: Surplus Aid/PHS

Surplus Aid =

Ceding Commissions Ratio × Sum of UEPR (Non Affiliates)

Normal Range: < 15%

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.

Equation and Normal Range for 2yr overall operating ratio

Equation: 2yr Loss Ratio + 2yr Expense Ratio + 2yr Investment Ratio

Normal Range: < 100%

Equation and Normal Range for Investment Yield

Equation:

2 × Net Investment Income Earned/Cash & Invested Assets between Current & Prior Yrs

Normal Range: Between 3% and 6.5%

Equation and Normal Range for Gross change in PHS

Equation: Change in PHS/Prior PHS

Normal Range: Between -10% and 50%

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 or Transferred Surplus Paid in or Transferred

Normal Range: Between -10% and 25%

Equation and Normal Range for Adjusted Liabilities: Liquid Assets

- Equation: Adjusted Liabilities/Liquid Assets
- Adjusted Liabilities = Liabilities equal to Deferred Agents Balances
- Liquid Assets are net of investments in parents, subsidiaries & affiliates
- Normal Range: < 100%

Equation and Normal Range for Gross Agents Balances: PHS

Equation: Gross Agents Balances in the course of collection/PHS

Normal Range: < 40%