Management Chapter 3 2 If the loss ratio on a line of insurance is 70 percent and loss adjustment expenses are 33 percent, then the line is profitable before dividends if the ratio of

61. The largest asset category on the balance sheet of U.S. life insurance companies as of year-end 2009 was

62. The largest liability category on the balance sheet of U.S. life insurance companies as of year-end 2009 was

63. Guaranteed investment contracts (GICs) offered by a life insurance company

64. The surrender value of an insurance policy is

65. Which of the following did NOT occur in the life insurance industry during the most recent financial crisis?

66. The McCarran-Ferguson Act of 1945

67. As of 2009, the primary regulator of both the life and property-casualty insurance industry is/are the

68. The insurance company that was the largest beneficiary of federal bailout funds during the most recent

financial crisis was

69. Underwriting risk faced by property-casualty insurance companies may result from unexpected

70. Life insurance guaranty funds

71. Property-casualty insurance involves

72. As of year-end 2009, asset of property-casualty insurers totaled approximately _______, which was ______

of the assets of the life insurance industry.

73. The two policy categories offered by property-casualty insurers that are most likely to be subject to rate

regulation are

74. If losses on a particular line of medical malpractice insurance were $650 million and premiums earned were

$575 million, the loss ratio would be

75. If losses on a particular line of fire insurance were $430 million, premiums earned were $595 million, and

loss adjustment expenses were $95 million, the combined ratio would be

76. For property-casualty insurers, loss rates are more predictable for

77. Higher uncertainty of losses forces property-casualty firms to

78. For property-casualty insurers, losses are higher for lines that are exposed to

79. Factors that affect the predictability of claims loss exposure include

80. If the loss ratio on a line of insurance is 70 percent and loss adjustment expenses are 33 percent, then the

line is profitable before dividends if the ratio of

81. An insurance company collected $31.0 million in premiums and disbursed $28 million in losses. Loss

adjustment expenses amounted to $5.0 million. The firm is profitable

82. You start an annuity with $1million and expect to receive 12 equal payments beginning at the end of the

first year. The guaranteed annual interest rate is 6 percent. The annual payments that you expect to collect are

83. Calculate the annual cash flows of a $2 million, 10-year fixed-payment annuity earning a guaranteed 8

percent annually if the payments are to begin at the end of the year.

84. What explains the recent increase in many large insurance companies conversion to stockholder controlled

companies?

85. Which of the following is an advantage of converting from a mutual insurance company to a

stockholder-controlled company?

86. Which of the following is NOT a possible result when a property-liability company purchases reinsurance?

87. Which account refers to the reserve set-aside that contains the portion of a premium that has been paid

before insurance coverage has been provided?

88. The largest asset on property-casualty insurers’ balance sheet as of year-end 2009 was

89. The largest liability on property-casualty insurers’ balance sheet as of year-end 2009 was

90. The decline in premium income from 2007-2009 in the property-casualty industry can be explained by the

91. Which of the following arises in policies in which the insured event occurs during a coverage period but a

claim is not filed or reported until many years later?

92. What does the loss ratio measure in any particular year?

93. Which of the following is used as collateral when an insurance company issues policy loans?

94. What is essentially understood to be insurance for property-casualty insurance companies?

95. Which of the following observations concerning reinsurance is FALSE?

96. The operating ratio for a PC insurer equals

97. Calculate the annual cash flows of a $2 million, 10-year fixed-payment annuity earning a guaranteed 8

percent per annum if annual payments are to begin at the end of year 6.

98. Calculate the annual cash flows of a $500,000, 12-year fixed-payment annuity earning a guaranteed 6

percent per annum if annual payments are to begin at the end of the year.

99. Calculate the annual cash flows of a $500,000, 12-year fixed-payment annuity earning a guaranteed 5

percent per annum if annual payments are to begin at the end of year 4.