Reading 10 - Financial Institutions Flashcards
How do financial institutions differ from other companies?
Financial institutions differ from other companies due to systemic importance and regulated status.
What does Basel III refer to in the context of financial institutions?
Basel III refers to the minimum levels of capital and liquidity required for financial institutions.
What does CAMELS stand for in the analysis of financial institutions?
- Capital adequacy
- Asset quality
- Management
- Earnings
- Liquidity
- Sensitivity
How is the liquidity coverage ratio calculated?
The liquidity coverage ratio is calculated as highly liquid assets divided by expected cash outflows.
How is the net stable funding ratio calculated?
The net stable funding ratio is calculated as available stable funding divided by required stable funding.
What are some key ratios used in analyzing insurance companies?
Underwriting loss ratio
Expense ratio
Loss and loss adjustment expense ratio
How is the underwriting loss ratio calculated?
Underwriting loss ratio = (claims paid + Δ loss reserves) / net premiums written
How is the expense ratio calculated?
Expense ratio = underwriting expenses including commissions / net premium written
How is the loss and loss adjustment expense ratio calculated?
Loss and loss adjustment expense ratio = (loss expense + loss adjustment expense) / net premiums earned
What is the formula for the dividends to policyholders ratio?
Dividends to policyholders ratio = dividends to policyholders / net premiums earned
What is the formula for the combined ratio after dividends?
Combined ratio after dividends = combined ratio + dividends to policyholders ratio
What is the formula for the total investment return ratio?
Total investment return ratio = total investment income / invested assets
