U/W Profit=Direct earned prem - Inc. Losses - Fixed expenses - Var expense
%(Direct earned prem)
=80,000 - 52,000 - 10,000 - 0.25(80,000) = -2,000
U/W Profit provision = (U/W Profit)/Direct earned premium = -2,000/80,000 =
-0.025 = U in Robbin's CY ROE formula:
U = {1/(1-tax rate)}*[r(QSR/PSR) - i(1-tax)(PHSF - 1/PSR)]
QSR = Eq/Sur = (Eq/P)*(P/S) = (1/2.5)*(3) = 1.2
PHSF = 64,000/Direct earned prem. = 64,000/80,000 = 0.8
-0.025 = {1/(1-0.34)}*[r(1.2/3) - (0.1)*(1-0.34)(0.8 + 1/3)]
Solve for r.
-----Original Message-----
From: jnielsen@amre.com [SMTP:jnielsen@amre.com]
Sent: Monday, May 11, 1998 1:16 PM
To: studygroup6@lists.casact.org
Subject: Exam Thoughts
I thought the exam was relatively fair. There were alot more
questions on
the ASBs and the Health papers than I anticipated, but I think it
was a
fairly easy exam. As this is my first sitting for Part 6, I really
don't
have anything to compare it to, nor do I have a feel for what the
pass mark
might be. Did anyone do #31 (Robbins CY ROE)? In hindsight, the
only way
I could figure to answer this would be to solve two equations for
the two
unknowns (U/W profit and the ROE), since neither were given. Any
thoughts?