PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

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318 THE APPLICATION OF FUNDAMENTAL VALUATION PRINCIPLES² These gross loss, gross LAE, and ceded ratios are applied tothe December 31, 2001, unearned premium reserve and earnedpremium generated by the forecasted written premium.Total Underwriting Year Expenses² As shown in Sheet 4 of Exhibits 18, 19, and 20, the underwritingexpense ratios for each line of business are as follows(DEP = direct earned premium, CWP = ceded writtenpremium):Agents’ Premium Other Underwriting ReinsuranceCommission Tax Expenses Commissions(% DWP) (% DWP) (% DEP) (% DWP) (% CWP)Workers Comp 10.0% 3.0% 3.0% 2.25% 0.0%Auto Liability 15.0% 2.0% 2.25% 3.25% N/AGeneral Liability 12.5% 2.0% 4.0% 1.0% 0.0%Investment income is shown in row (5) of the Statutory IncomeStatement (Exhibit 9). The sources of investment incomeare realized capital gains, interest income, and dividends. Theannual yield rates (pretax) for each asset type are shown below:Realized Capital GainsPreferred Stocks 2.5%Common Stocks 4.0%Real Estate 4.0%Interest IncomeTaxable Bonds 6.0%Non-taxable Bonds 4.0%Cash 3.0%Real Estate 4.0%Other 2.0%
THE APPLICATION OF FUNDAMENTAL VALUATION PRINCIPLES 319DividendsPreferred Stocks 5.0%Common Stocks 2.0%Invested Asset and Cash DistributionTaxable Bonds 42.0%Non-taxable Bonds 24.0%Preferred Stocks 1.0%Common Stocks 25.0%Cash 5.0%Real Estate 1.0%Other 2.0%Total 100.0%Invested assets held at the beginning of a forecasted year willearn a full year of investment income based on the assumedyield percentages. Investment income is also earned on new cashgenerated by PSIC’s insurance operations. The financial modelassumes that cash from operations is collected and invested at themidpoint of each forecasted year. The collected cash is investedaccording to the distribution of invested assets and cash shownabove. Thus, the distribution is constant for all forecasted years.Cash flows from operations are shown in Exhibit 13. Premiumcollections, loss and LAE payments, and underwriting expensepayments are modeled for each line of business. Sheet 3 of Exhibits18, 19, and 20 shows the cash flow from underwriting foreach line of business, respectively. In addition to the premium,loss, LAE, and underwriting expense assumptions, the line ofbusiness underwriting cash flow relies on the following assumptions:² Loss and LAE payment patterns for each line of businessshown in Sheet 5 of Exhibits 18, 19, and 20, respectively. Thepayment patterns apply to reserves carried as of December
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VOLUME XCII NUMBERS 176 and 177PROC
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FOREWORDActuarial science originate
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2005 PROCEEDINGSCONTENTS OF VOLUME
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2005 PROCEEDINGSCONTENTS OF VOLUME
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Editorial Committee, Proceedings Ed
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2 AN EXAMINATION OF THE INFLUENCE O
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10 AN EXAMINATION OF THE INFLUENCE
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AN EXAMINATION OF THE INFLUENCE OF
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RISKINESS LEVERAGE MODELSRODNEY KRE
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RISKINESS LEVERAGE MODELS 33There a
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RISKINESS LEVERAGE MODELS 35where f
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RISKINESS LEVERAGE MODELS 37where a
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RISKINESS LEVERAGE MODELS 39Various
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RISKINESS LEVERAGE MODELS 51ple. Th
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RISKINESS LEVERAGE MODELS 53the TVA
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RISKINESS LEVERAGE MODELS 55We also
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RISKINESS LEVERAGE MODELS 59APPENDI
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DISCUSSION OF A PAPER PRESENTED AT
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RISKINESS LEVERAGE MODELS 63known t
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RISKINESS LEVERAGE MODELS 65to be a
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RISKINESS LEVERAGE MODELS 67implies
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RISKINESS LEVERAGE MODELS 734. INTE
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RISKINESS LEVERAGE MODELS 79REFEREN
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RISKINESS LEVERAGE MODELS 81EXHIBIT
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RISKINESS LEVERAGE MODELS 83
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WHY LARGER RISKS HAVE SMALLER INSUR
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ADDRESS TO NEW MEMBERS 151ateship a
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ADDRESS TO NEW MEMBERS 153You shoul
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ADDRESS TO NEW MEMBERS 155strength
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MINUTES OF THE 2005 CAS SPRING MEET
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MINUTES OF THE 2005 SPRING MEETING
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Volume XCII, Part 2 No. 177PROCEEDI
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MODELING FINANCIAL SCENARIOS 179Bab
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WHEN CAN ACCIDENT YEARS BE REGARDED
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THE APPLICATION OF FUNDAMENTAL VALU
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A NEW METHOD OF ESTIMATING LOSS RES
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ARCHITECTURE FOR RESIDENTIAL PROPER
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ESTIMATING THE WORKERS COMPENSATION
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INCORPORATION OF FIXED EXPENSESGEOF
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DISCUSSION OF PAPER PUBLISHED INVOL
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APPLICATION OF THE OPTION MARKET PA
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THE “MODIFIED BORNHUETTER-FERGUSO
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ADDRESS TO NEW MEMBERS-NOVEMBER 14,
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ADDRESS TO NEW MEMBERS 743Now to an
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PRESIDENTIAL ADDRESS-NOVEMBER 14, 2
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MINUTES OF THE 2005 CAS ANNUAL MEET
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REPORT OF THE VICE PRESIDENT-ADMINI
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2005 EXAMINATIONS—SUCCESSFUL CAND
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OBITUARIESROBERT GRANT ESPIECLYDE H
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OBITUARIES 825SIDNEY M. HAMMER1931
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OBITUARIES 827J. GARY LaROSE1947—
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OBITUARIES 829PAUL J. SCHEEL SR.193
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OBITUARIES 831LEO M. STANKUSCirca 1
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INDEX TO VOLUME XCIIPage2005 EXAMIN
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835GRAVES, CLYDE H.INDEX—CONTINUE
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837INDEX—CONTINUEDREPORT OF THE V
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PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

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