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CPCU 520-13

Chapter 13

QuestionAnswer
Capacity or Premium to surplus Ratio A ratio that mes. the extent to which insr. can issue policies for new business by comparing an insurer's net written premiums to policyholder's surplus
Liquidity Ratio A ratio measuring the extent that an insurer can meet its obligations as they come due a [Formula] the sum of cash + invested assets divided by unearned premium reserve + adjusted reserves
Operating Ratio A ratio that meas. an insurer's overall pretax operational profitability from UW and investment activities [Formula] combined ratio - investment ratio
Investment earning ratio a ratio that measures the return on invested funds by showing the relationship between net investment income and avg. admitted assets.
Investment profit ratio A ratio that measures the return of invested funds by div. total investment profit (loss) by avg. admitted assets.
Return on net worth ratio a ratio that relates net income to the insurer's net worth (policyholders' surplus).
Earnings per share (EPS) A ratio that is calculated by div. net income by the weighted avg. number of common shares outstanding during the accounting period.
Quick liquidity ratio A ratio that measures short term liquidity by comparing quick assets by net liabilities.
Current liquidity ratio the ratio of the sum of all cash and all unaffiliated invested assets (excluding real estate) to net liabilities and ceded reinsurance balances payable, expressed as a percentage.
Overall liquidity ratio A ratio that measures the ability to pay net liabilities with total assets and that is calculated by dividing total admitted assets by total liabilities minus conditional reserves
Operating cash flow test a measure of the liability to meet current obligations through internally generated funds.
Class 3-6 Bonds to PHS Ratio The ratio of non investment grade bonds to policyholder surplus.
change in net premiums written a measure of the growth in an insurer's uw loss exposure
Net premiums written to policyholder's surplus (Net premiums written leverage ratio) A ratio that measures leverage resulting from current premium writings
Net liab. to policyholder's surplus (net liability leverage ratio) A ratio that determines an insurer;s loss exposure to unpaid obligations, unearned premiums, and reserving errors.
Net leverage ratio a ratio that measures an insurer's loss exposure to both pricing errors and erros in estimating liabilities, after reinsurance, in relation to policyholders surplus.
Ceded reinsurance leverage ratio a raatio that measures an insurer's dependence on reinsurers and its loss exposure to the possibility that it might be unable to collect amounts due from reinsurers.
Ceded reins. leverage ratio [Formula] the sum of reinsurance premiums ceded plus reinsurance recoverables minus funds held from reinsurers, divided by surplus
Gross leverage ratio a ratio that measures an insurer's loss exposure caused by pricing errors in its current book of business, reserve estimation errors, and reinsurance exposure [formula] net leverage ratio + ceded reins. ratio
Loss reserves to policyholders' surplus ratio a ratio that measures the trend and magnitude of an insurer's total loss reserves to surplus.
Loss development to policyholders' surplus ratio a meas. of reserve deficiency or redundancy in relation to surplus that reveals the degree to which year end surplus was either under or over stated.
Loss reserve development to net premiums earned ratio a ratio that is calculated for the most recent five years and measures the degree to which an insurer's loss reserves are keeping pace with its premium growth.
Created by: holl6425
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