Chapter 34: Accounting results Flashcards
1
Q
What are the four main concerns when analysing accounts?
A
- Accounting rules and local conventions
- Basis accounts prepared on
- Changes in accounting practice
- Accounting principles of territory
2
Q
What can be obtained from the company accounts (5)
A
- Performance against key objectives
- Investment strategy and performance
- Progress against strategic goals
- Attitude towards risks, key risks, risk management and risk mitigation
- Governance arrangements and how the board ensures it is independent
3
Q
What factors should be considered when interpreting insurance companies’ accounts
A
- Underwriting cycle means there is a cyclical effect - so we need to compare insurers who sell similar products
- Strength of basis in determining liabilities
- Key ratios
- Incurred expenses to premium income
- Commission to premium income
- Operating ratio (incurred claims and expenses to premium income)
- Outgoing reinsurance premium to gross premium income
4
Q
What factors should be considered when interpreting banks accounts
A
- Subject to cyclical effect - so we need to compare banks who sell similar products
- Measures
- PD
- LGD
5
Q
What information should be disclosed to beneficiaries in benefit schemes
SCRIBE
A
S - Strategy for investments C - Contribution obligations R - Risks involved I - Insolvency entitlement B - Benefits entitlement E - Expense charges
6
Q
When can disclosure commence?
PRICE
A
P - Payment received R - Requested I - Intervals C - Combinations E - Entry
7
Q
What information should be disclosed to owners of capital in benefit schemes
DIM CLAIMS
A
D - Director’s benefit costs
I - Invest return over the year
M - Membership movements
C - Changes in surplus or deficit over the year L - Liabilities accruing over the year A - Assumptions I - Increase in past service liabilities M - (Actuarial) methods S - Surplus or deficit
