Difference between revisions of "Odomirok.21-Tools"
Jump to navigation
Jump to search
| (15 intermediate revisions by 2 users not shown) | |||
| Line 1: | Line 1: | ||
| − | + | '''Reading''': Financial Reporting Through the Lens of a Property/Casualty Actuary - '''Chapter 21''' - '''Measurement Tools''' | |
| − | + | '''Author''': ''Kathleen C. Odomirok'', FCAS, MAAA, ''Liam M. McFarlane'', FCIA, FCAS, ''Gareth L. Kennedy'', ACAS, MAAA, ''Justin J. Brenden'', FCAS, MAAA, ''EY'' | |
| + | [https://www.battleacts6us.ca/vanillaforum6us/categories/odomirok-21-tools<span style="font-size: 12px; background-color: lightgrey; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 0px;">'''Forum'''</span>] | ||
| − | == | + | {| class='wikitable' style='background-color: navajowhite; |
| + | |- | ||
| + | || '''BA Quick-Summary''': <span style="color: green;>'''Measurement Tools'''</span> | ||
| − | + | The chapter discusses various measurement tools used to '''evaluate the financial health''' of property/casualty insurance companies. | |
| − | + | No single tool can provide a comprehensive assessment, and a '''combination of tools''' should be used to gain insights, including: | |
| − | |||
| − | + | * audited financial statements | |
| − | + | * IRIS ratios | |
| − | + | * RBC calculations | |
| − | + | These tools can help identify trends and potential issues over time, offering '''early warnings of financial impairment risks''', but they cannot detect every problem ''(such as management deficiencies or fraud.)'' | |
| − | |||
| − | |||
| − | |||
| − | |||
| − | |||
| − | | | + | |} |
| − | |||
| − | |||
| − | |||
| − | |||
| − | |||
| − | + | ==Study Tips== | |
| − | |||
| − | |||
| − | |||
| − | |||
| − | |||
| − | + | This chapter provides a nice overview and is good bedtime reading. But since there has never been an exam question specifically from this chapter, spend no more than 30 minutes. There are just a few basic BattleCards. | |
| − | |||
| − | |||
| − | |||
| − | |||
| − | |||
| − | + | ==BattleTable== | |
| − | |||
| − | |||
| − | |||
| − | |||
| − | |||
| − | + | * ''this reading has not been tested on any exam from the year 2012 to Fall 2019 when the exams stopped being published.'' | |
| − | |||
| − | |||
| − | |||
| − | |||
| − | |||
| + | : {| class="wikitable" style="width: 1000px;" | ||
|- | |- | ||
| − | | | + | ! style="width: 175px;" | reference !! part (a) !! part (b) !! part (c) !! part (d) |
| − | |||
| − | |||
| − | |||
| − | |||
|- | |- | ||
| − | | | + | || ''no prior questions'' |
|| | || | ||
|| | || | ||
| Line 71: | Line 40: | ||
|| | || | ||
| − | | | + | |} |
| − | |||
| − | |||
| − | |||
| − | |||
| − | |||
| − | + | [https://www.battleacts6us.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=Odomirok&suffix=21-Tools§ion=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=all<span style="font-size: 20px; background-color: lightgreen; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''Full BattleQuiz]'''</span> <span style="color: red;">'''You must be <u>logged in</u> or this will not work.'''</span> | |
| − | |||
| − | |||
| − | |||
| − | |||
| − | |||
| − | + | [https://www.battleacts6us.ca/vanillaforum6us/categories/odomirok-21-tools<span style="font-size: 12px; background-color: lightgrey; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 0px;">'''Forum'''</span>] | |
| − | |||
| − | |||
| − | |||
| − | |||
| − | |||
| − | + | ==In Plain English!== | |
| − | |||
| − | |||
| − | |||
| − | |||
| − | |||
| − | + | Statutory statements show '''financial health''' ''(or lack thereof)'' in 2 ways: | |
| + | * balance sheet strength - ''are assets sufficient to cover liabilities'' | ||
| + | * earning potential - ''is the company going to generate a profit going forward'' | ||
| − | + | On an insurer's balance sheet, the biggest liability is reserves, and information on '''reserve adequacy''' can be found in several places in the annual statement: | |
| + | * 5-year historical exhibit | ||
| + | * Schedule P ''(this is where the really good information is)'' | ||
| + | * Schedule F ''(shows reserves <u>net</u> of reinsurance)'' | ||
| + | * notes to the financial statements ''(miscellaneous items that may or may not provide further details on reserve adequacy)'' | ||
| + | There are some common causes and/or warning signs for '''insolvencies''': [Hint: <span style="color: red;">'''GoNGS'''</span>] | ||
| + | : <span style="color: red;">'''Gov'''</span> - poor <u>Go</u>vernance ''(CEO sucks)'' | ||
| + | : <span style="color: red;">'''N'''</span> - <u>N</u>ew entrant to market ''(inexperienced management, lower capital)'' | ||
| + | : <span style="color: red;">'''G'''</span> - <u>G</u>rowth too rapid ''(get premiums up front, but the trouble starts when the losses start rolling in)'' | ||
| + | : <span style="color: red;">'''S'''</span> - <u>S</u>ize too small ''(can't absorb unexpected losses)'' | ||
| − | + | In my head, I read the hint as ''Gongs'', as in that old T.V. show called the ''The Gong Show''. Anyway, 2 other general reasons for '''insolvencies''' are: | |
| + | * deficient reserves | ||
| + | * under-pricing | ||
| − | + | One more memory trick for reasons for insolvency: | |
| + | : <span style="color: red;">'''D'''</span>eficient reserves | ||
| + | : <span style="color: red;">'''U'''</span>nderpricing | ||
| + | : <span style="color: red;">'''N'''</span>ew entrant to market | ||
| + | : <span style="color: red;">'''G'''</span>rowth too rapid | ||
| − | + | ''(because insolvency puts you in deep doo-doo.)'' | |
| + | And just a few more "crap" reasons that have appeared in examiner's reports: | ||
| − | + | * <span style="color: red;">'''C'''</span>atastrophe | |
| + | * <span style="color: red;">'''R'''</span>einsurer insolvency | ||
| + | * <span style="color: red;">'''A'''</span>sbestos | ||
| + | * <span style="color: red;">'''P'''</span>oor investment results | ||
| − | == | + | [https://www.battleacts6us.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=Odomirok&suffix=21-Tools§ion=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=all<span style="font-size: 20px; background-color: lightgreen; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''Full BattleQuiz]'''</span> <span style="color: red;">'''You must be <u>logged in</u> or this will not work.'''</span> |
Latest revision as of 23:38, 27 June 2024
Reading: Financial Reporting Through the Lens of a Property/Casualty Actuary - Chapter 21 - Measurement Tools
Author: Kathleen C. Odomirok, FCAS, MAAA, Liam M. McFarlane, FCIA, FCAS, Gareth L. Kennedy, ACAS, MAAA, Justin J. Brenden, FCAS, MAAA, EY
| BA Quick-Summary: Measurement Tools
The chapter discusses various measurement tools used to evaluate the financial health of property/casualty insurance companies. No single tool can provide a comprehensive assessment, and a combination of tools should be used to gain insights, including:
These tools can help identify trends and potential issues over time, offering early warnings of financial impairment risks, but they cannot detect every problem (such as management deficiencies or fraud.) |
Study Tips
This chapter provides a nice overview and is good bedtime reading. But since there has never been an exam question specifically from this chapter, spend no more than 30 minutes. There are just a few basic BattleCards.
BattleTable
- this reading has not been tested on any exam from the year 2012 to Fall 2019 when the exams stopped being published.
reference part (a) part (b) part (c) part (d) no prior questions
Full BattleQuiz You must be logged in or this will not work.
In Plain English!
Statutory statements show financial health (or lack thereof) in 2 ways:
- balance sheet strength - are assets sufficient to cover liabilities
- earning potential - is the company going to generate a profit going forward
On an insurer's balance sheet, the biggest liability is reserves, and information on reserve adequacy can be found in several places in the annual statement:
- 5-year historical exhibit
- Schedule P (this is where the really good information is)
- Schedule F (shows reserves net of reinsurance)
- notes to the financial statements (miscellaneous items that may or may not provide further details on reserve adequacy)
There are some common causes and/or warning signs for insolvencies: [Hint: GoNGS]
- Gov - poor Governance (CEO sucks)
- N - New entrant to market (inexperienced management, lower capital)
- G - Growth too rapid (get premiums up front, but the trouble starts when the losses start rolling in)
- S - Size too small (can't absorb unexpected losses)
In my head, I read the hint as Gongs, as in that old T.V. show called the The Gong Show. Anyway, 2 other general reasons for insolvencies are:
- deficient reserves
- under-pricing
One more memory trick for reasons for insolvency:
- Deficient reserves
- Underpricing
- New entrant to market
- Growth too rapid
(because insolvency puts you in deep doo-doo.)
And just a few more "crap" reasons that have appeared in examiner's reports:
- Catastrophe
- Reinsurer insolvency
- Asbestos
- Poor investment results
Full BattleQuiz You must be logged in or this will not work.
