CCIR. Instructions

Question 1

What is the fundamental accounting equation for equity?

Answer 1

Assets = Liabilities + Equity

Question 2

What is the 2nd method to calculate equity (from prior year)?

Answer 2

Eq(x) = Eq(x-1) + CI(x)
CI = Comprehensive Income = NI + OCI - Paid dividends (if any)

Question 3

What is the 3rd method to get equity (from balance sheet items)?

Answer 3

E(x) = PHE(x) + SHE(x) + nci(x)

PHE(x) = Policyholder’s equity for year x
SHE(x) = Shareholder’s equity for year x
nci(x) = non-controlling interests for year x

Question 4

Identify the 7 components of Shareholder’s equity? (Hint: CP-CORNA)

Answer 4

1. Common Shares
2. Preferred Shares
3. Contributed Surplus
4. Other Capital
5. Retained Earnings
6. Nuclear Reserves
7. AOCI

Question 5

Identify the 5 components of Policyholder’s equity.

Answer 5

1. Residual Interest (Non-Stock)
2. Participating Account
3. Participating Account - Accumulated OCI (Loss)
4. Non-Participating Account
5. Non-Participating Account - Accumulated OCI (Loss)

Question 6

Define unrealized gain.

Answer 6

An increase in the value of an asset or investment that an investor has not sold.

They are included in AOCI (line 570 from 20.11)

Question 7

How do you calculate the Net Combined Operating Ratio? (NCOR)

Answer 7

NLR + Operating Expenses / EP

Question 8

How do you calculate the Net Loss Ratio (NLR)?

Answer 8

APV(incurred claims) / EP
APV(inc claims) = paid loss in period + chg(APV of unpaid claims)
EP = WP - chg(UEP)

Question 9

Briefly describe page 20.10 from PC1 extracts.

Answer 9

Statement of Financial Position - Assets

Question 10

Briefly describe page 20.11 from PC1 extracts

Answer 10

Statement of Financial Position - Liabilities and Equity

Question 11

Briefly describe page 20.22 from PC1 extracts

Answer 11

Statement of Profit or Loss

Line 440 = Profit (Loss) Before Taxes
Line 499 = Total Taxes
Line 510 = Profit (Loss) After Taxes
Line 520 = Discontinued Operations (net of Income Taxes)
Line 999 = Net Income (Loss)

Question 12

Calculate Net Income

Answer 12

NI = ISR + NIR + OIE - Taxes + Discontinued Operations

ISR = Insurance Service Result
NIR = Net Investment Result
OIE = Other Income & Expenses

Question 13

Calculate Insurance Service Result (ISR)

Answer 13

ISR = TIR - ISE + NRE

TIR = Total Insurance Revenue
ISE = Insurance Service Expenses
NRE = Net Expenses from Reinsurance Contracts Held

Note: if ISE and NRE are already negative, then add them instead of subtracting

Question 14

Calculate Total Insurance Revenue (TIR)

Answer 14

TIR = sum of:
Revenues from PAA Contracts
Revenues from GMM Contracts
Revenues from VFA Contracts

Question 15

Briefly describe page 40.74 from PC2 extracts

Answer 15

Net Investment Income and Investment Return can be found on that page.

Question 16

Calculate Net Investment Income (NII)

(Hint: TT-DI-ET)

Answer 16

NII =
+ Total Realized Gains (Losses) on Sale
+ Total Fair Value Gains (Losses)
+ Dividends
+ Gross Investment Income
- Investment Expenses
- Investment Taxes

Question 17

Calculate Investment Return (IR)

Answer 17

IR = NII - Provision for Credit Losses

Question 18

Calculate Total Realized Gains (Losses) on Sale or Total Fair Value Gains (Losses)

(Hint: BIMPI)

Answer 18

Sum of:
Bonds
Mortgage Loans
Preferred & Common Shares
Investment Properties
Income from Derivative Assets

Note: they have to tell whether items pertained to the realized gains or the fair value gains.

Question 19

Briefly describe page 10.60 from PC3 extracts

Answer 19

Summary of Selected Financial data for Five Years

Contains Financial Metrics: Adjusted Equity, Investment Yield, ROE, Claims Development as a % of Adjusted Equity, Agents and Brokers Balances Due from Subs and Associates as a % of Adjusted Equity

Question 20

Calculate Adjusted Equity

Answer 20

Adjusted Equity = E - NCI - Cat Reserves - Unregistered Reins

E = Total Equity from page 20.11
NCI = Non-controlling interests from page 20.11

Question 21

Calculate Investment Yield

Answer 21

2(I + PI)100 / (Vb + Ve - I - PI)

I = Investment Return from page 20.22
PI = Share of Net Income (Loss) of Equity Accounted Investees from page 20.22
Vb = C(x-1) + InvInc(x-1) + Inv(x-1) from page 20.10
Ve = C(x) + InvInc(x) + Inv(x) from page 20.10
C = Cash & Cash Equivalents
InvInc = Accrued Investment Income
Inv = Investments

Question 22

Calculate Return on Equity

Answer 22

ROE = (2 * NI * 100) / (Eb + Ee)

NI = Net Income (Loss) for Year from page 20.22
Eb = E(x-1) from page 20.11
Ee = E(x) from page 20.11

Question 23

Calculate Agents and Brokers Balances Due from Subs and Associates as a % of Adjusted Equity

Answer 23

(Receivables-unaffiliated agents and brokers + Receivables-subsidiaries, associates and joint ventures) / Adjusted Equity

Question 24

Claims Development as a % of Adjusted Equity

Answer 24

Amount: excess (deficiency) / Adjusted Equity

Excess if on page 60.35 line 599, column 29
Adjusted Equity is on page 10.60 line 04

Question 25

Briefly Describe page 60.25 from PC2 extracts

Answer 25

Insurance Service Result

Also includes Number of Direct Claims

Question 26

Briefly describe page 60.45 from PC3 extracts and how it is calculated

Answer 26

Net Ultimate Claims and Adjustment Expenses - Claims Development

PYD Excess (Deficiency) = End of Year Ultimate Claims & Adjustment Expenses (net of reins, undiscounted) for prior year
- End of Year Ultimate Claims & Adjustment Expenses (net of reins, undiscounted) for current year

If given net claims, subtract paid amounts to get ultimate claims

Question 27

The grand total from page 60.25 should match….?

Answer 27

The top portion of page 20.22 (lines 99, 110, 120 and 199)

Question 28

Calculate the Amount of Excess (Deficiency)

Answer 28

Excess (Deficiency) =
Undisc LIC(Prior Year End)
- Net amount paid during the year for claims & adjustment expenses of prior years (excl 1st CY)
- Undisc LIC(for prior years)

= APV(beg) - Pd(All) - APV(end)

STATE EXPLICITLY IF EXCESS/DEFICIENCY/NEITHER !!!