Financial Analysis & Valuation Flashcards
7 cards from real ACE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Analysis & Valuation flashcards as text
Which ACORD form element is critical when capturing data needed to calculate the earned premium for a mid-term policy change?
Answer: Effective date of the endorsement and pro-rata factors
To calculate earned premium for a mid-term change, you need the endorsement effective date and the applicable pro-rata or short-rate factor.
What does adverse loss development indicate in the context of insurance financial analysis?
Answer: Original loss reserves were understated, requiring upward revision
Adverse loss development occurs when actual claims exceed original reserve estimates, forcing the insurer to increase reserves and recognize additional losses.
A reinsurance treaty with a 70% quota share arrangement means:
Answer: The reinsurer assumes 70% of premiums and losses on covered policies
In a quota share treaty, the reinsurer takes a fixed percentage (70%) of both premiums and losses on the covered business.
Which financial metric best measures an insurer's investment portfolio efficiency?
Answer: Net investment yield (investment income / average invested assets)
Net investment yield measures how effectively an insurer generates income from its invested assets relative to the portfolio's total value.
When performing a price-to-book (P/B) valuation for a property & casualty insurer, what book value adjustment is typically needed?
Answer: Mark loss reserves to fair value and adjust for reserve adequacy
P/B valuations for P&C insurers require adjusting stated book value for the difference between carried reserves and actuarially estimated reserve adequacy.
In insurance financial analysis, what does the 'two-year operating ratio' combine?
Answer: Combined ratio and net investment income ratio
The two-year operating ratio combines the combined ratio with the net investment income ratio to reflect overall profitability including investment results.
Which component of the ACORD framework supports standardized data exchange required for automated financial statement generation?
Answer: ACORD XML data standards
ACORD XML data standards provide structured, machine-readable data formats that enable automated processing and financial statement generation across systems.