Difference between revisions of "Odomirok.12-5yr"
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* operating ratios | * operating ratios | ||
* RBC - ''total capital & ACL (Authorized Control Level Capital)'' | * RBC - ''total capital & ACL (Authorized Control Level Capital)'' | ||
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+ | :{| class='wikitable' | ||
+ | |- | ||
+ | | '''Something Interesting''': The 5-year historical exhibit shows a line-of-business breakout by liability ''(long-tail)'' versus property ''(short-tail)''. | ||
+ | |} | ||
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+ | :: '''Implication''': If there has been a <u>mix-shift</u> from long-tail to short-tail or vice-versa, this could have implications for how you interpret reserves. Long-tail lines have higher reserves and settle more slowly. Recall '''part (b)''' the following exam problem from [[Feldblum.Surplus]]: | ||
+ | |||
+ | ::: [https://www.battleacts6us.ca/pdf/Exam_(2015_1-Spring)/(2015_1-Spring)_(12).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2015.Spring #12)'''</span> | ||
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+ | :: You were asked to identify an annual statement exhibit to support the actuary's assertion that the reserve increase was <u>not</u> due to prior inadequacy. One possible answer is a mix-shift from short-tail to long-tail lines. This would cause the reserves to increase because long-tail lines have higher reserves ''(not necessarily because of prior AY inadequacy.)'' | ||
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Revision as of 12:35, 4 April 2019
The Five-Year Historical Data exhibit summarizes 5 years of key financial statistics from past Annual Statements. (Most other annual statement exhibits show only 1 or 2 years of data.)
Study Tips
Study the examiner's report solution to (2018.Spring #13) very carefully. It's a good question. Information from Odomirok.13 may also be useful here. It's valuable to spend up to 2 hours on this chapter.
BattleTable
Based on past exams, the main things you need to know (in rough order of importance) are:
- how to use general knowledge to interpret information on the 5-year historical exhibit
reference part (a) part (b) part (c) part (d) E (2018.Spring #13) financial health
- area of concern #1financial health
- area of concern #2financial health
- area of concern #3financial health
- area of concern #4
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In Plain English!
The 2018.Spring exam question doesn't require you to have any special knowledge concerning the 5-Year Historical Data Exhibit. This question is testing a broader understanding of how to use financial statement data to understand a company.
The syllabus provides online examples of annual statements for Travelers and Liberty Mutual, but the Liberty Mutual example didn't include this exhibit. Check the Travelers annual statement for a real-life example of the 5-Year Historical Data Exhibit.
The way I think of this exhibit is that it pulls together information from many other exhibits and shows you all in 1 place, plus it shows you 5 years. It's a very useful exhibit to get an overview of the company.
Here are some examples of the types of data that are shown:
- premiums - gross & net
- balance sheet information - assets, liabilities...
- income statement information - U/W gain, investment gain,...
- operating ratios
- RBC - total capital & ACL (Authorized Control Level Capital)
Something Interesting: The 5-year historical exhibit shows a line-of-business breakout by liability (long-tail) versus property (short-tail).
- Implication: If there has been a mix-shift from long-tail to short-tail or vice-versa, this could have implications for how you interpret reserves. Long-tail lines have higher reserves and settle more slowly. Recall part (b) the following exam problem from Feldblum.Surplus:
- E (2015.Spring #12)
- You were asked to identify an annual statement exhibit to support the actuary's assertion that the reserve increase was not due to prior inadequacy. One possible answer is a mix-shift from short-tail to long-tail lines. This would cause the reserves to increase because long-tail lines have higher reserves (not necessarily because of prior AY inadequacy.)
Full BattleQuiz You must be logged in or this will not work.