MSA.RATIOS Flashcards
MCT Ratio (Minimum Capital Test)
Formula: CapAv / minCapReq
Acceptable range: > 150%
Meaning: measure of capital adequacy
ROE (return on equity)
Formula: (NI.preTax - TotTax)/Equity
Acceptable range: > 5.4%
Meaning: sustainability of earnings
ROR (return on revenue)
Formula: (U/W Inc. - CapGains + InvInc + IncFrmSubs)/GWP
Acceptable range: > 6.2%
Meaning: income relative to revenue-generating capacity
ROA (return on assets, after tax)
Formula: (NI.pretax - TotTax)/(2-yr avg of assets)
Acceptable range: > 2.6%
Meaning: efficiency measure for income-generation
Insurance return on Net EP
Formula: (U/W Inc. - CapGains + InvInc(from U/W Inc.))/NEP
Acceptable range: > 4.0%
Meaning: core earning capacity
Liabilities/Liquid Assets
Formula: Liabilities/Liquid Assets
Acceptable range: < 105%
Meaning: liquidity measure
Net Loss Reserves/Equity
Formula: Net Loss Reserves/Equity
Acceptable range: < 200%
Meaning: high ratio means financial distress
1-yr development/Equity
Formula: 1-yr development/Equity
Acceptable range: > -10%
Meaning: adverse development could mean under-reserving
Net Leverage
Formula: (Net Liabilities + NWP)/Equity
Acceptable range: < 500%
Meaning: stability measure (high ratio means excessive writing)
Adjusted Investment Yield
Formula: [2 x (Net InvInc. + OCI)]/(Invested Assets [start of yr] + Invested Assets [end of yr] - Net InvInc. - OCI)
Acceptable range: n/a
Meaning: measures income and capital gains relative to assets
Components Invested Assets (4)
Cash
Bonds & Debentures
Common Shares
Real Estate
Formule NEP
NEP = NWP - chg(UEP)
% Change in NWP
Formula: NWP(yr = x)/NWP(yr = x-1)
Acceptable range: n/a
Meaning: growth measure - high value may indicate capital strain
% Change in GWP
Formula: GWP(yr = x)/GWP(yr = x-1)
Acceptable range: n/a
Meaning: growth measure - high value may indicate capital strain
Change in Equity
Formula: EQ(yr = x)/EQ(yr = x-1)
Acceptable range: n/a
Meaning: lower value indicates lower ability to support growth