Odomirok.6-7-BS

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Based on past exams, the main things you need to know (in rough order of importance) are:

• layout of balance sheet
• identifying risks based on balance sheet information

reference	part (a)	part (b)	part (c)	part (d)
E (2012.Fall #18)	balance sheet: - construct from given info	financial health: - identify insurer risks

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In Plain English!

This chapter of Odomirok on the balance sheet is very important, but there are not very many old exam problems exclusively on this chapter. But to answer questions from later chapters, you have to have at least a general understanding of the balance sheet. We covered the basics of the balance sheet in Odomirok.8-9-IS but there are a few additional things you need to know.

Question: why is the balance sheet important to actuaries

• loss & LAE are the majority of the liabilities and actuaries either <set or have a significant role in determining the amount
• actuaries have a role in assessing the capital required to support an insurer's risks

Question: define the terms asset, liability, surplus

asset: a property, right, or claim arising from past events that has future value

liability: an obligation that the company must fulfill, based on past events or transactions, which will require the use of the company’s resources.

surplus: (sometimes called equity) is the difference between assets & liabilities

If you take a look at the exam question from 2012 that's listed in the BattleTable, you'll see that they ask you to construct the balance sheet based on the given information. To do this, you have to have a basic understanding of the layout of the 2 pages of the balance sheet. In very rough terms the asset side of the balance sheet looks like this:

item	ASSETS	nonadmitted assets	NET admitted assets	prior year
bonds	B	x	B – x	y
...	...	...	...	...
...	...	...	...	...
SUBTOTAL: cash & invested assets	...	...	...	...
uncollected premiums & agents balances	U	a	U – a	b
...	...	...	...	...
...	...	...	...	...
SUBTOTAL: non-invested assets	...	...	...	...

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BattleCodes

Memorize:

Conceptual:

Calculational: