Odomirok.12-5yr

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.)

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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.

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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 #1	financial health - area of concern #2	financial health - area of concern #3	financial 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 example of Fictitious Insurance Company in the appendices of Odomirok also provides an example.

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.)

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