(1) First, liabilities in the numerator also includes agents' balances in=20
the course of collection and installment premiums booked but deferred and=20
not yet due.
(2) The denominator, liquid assets, also includes installment premiums=20
booked but deferred and not yet due.
So this means the answer on that problem in the Study Manual was incorrect,=
=20
and the Troxel article does not show the most recent calculation for this=20
ratio. (!!!). Given all of the above, I think we should take what is in the=
=20
Troxel article as the best information we have, and if we are faced with a=20
problem on this exam and agents' balances is one of the given items, we can=
=20
all blow them away by saying that the most recent calculation includes a=20
piece of this, but since the designer of this problem did not split out=20
agents' balances in the proper way, we cannot calculate this ratio with wha=
t=20
is given. However, dear Exam Committee, if you want us to use the formula=20
that shows up in Troxel, here is the answer. OK, maybe we would leave out=20
the part about the Dear Exam Committee.
I hope I did not add to everyone else's confusion. Let me know if you have=20
any questions.
Dan Perry
----------
From: Dan Perry
To: studygroup8
Subject: NAIC IRIS Ratios - Again
Date: Thursday, April 09, 1998 7:38AM
I guess these IRIS (or Irish) Ratios seem to be a spawning ground for picky=
=20
questions. I have a question this time on the Liabilities to Liquid Assets=20
test. It is my understanding that Liquid Assets =3D cash + invested assets=20=
+=20
accrued investment income - investments in affiliates - real estate=20
investments in excess of 5% of liabilities. In the Casualty Study Manual,=20
under the Troxel section, Problem 7 (from the 1991 exam), for some reason i=
n=20
the solution they also included agents' balances as part of Liquid Assets.=20
Is that correct? Intuitively to me, it does not make sense to include=20
agents' balances as Liquid Assets, because they do not seem all that liquid=
=20
to me. Maybe those of you who actually use these ratios in practice=20
(Victoria, I believe you said you did) would have a better idea. Let me=20
know. Thanks.