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

690 INCORPORATION OF FIXED EXPENSEScharacteristics of the data used:Divided ByExpense Data Used Fixed VariableGeneral Expense Countrywide Earned Exposures Earned PremiumOther Acquisition Countrywide Written Exposures Written PremiumCommissions and Countrywide/State – Written PremiumBrokerageTaxes State – Written PremiumLicenses and Fees State Written Exposures –Exhibit 2-B summarizes the results of the analysis of the fixedand variable portions of each major expense group.Calculation of Statewide Indicated Rate ChangeThe most straightforward way to calculate the indicated ratechange is displayed on Exhibit 2-C. The statewide required projectedaverage premium is calculated as follows:SW Projected Average Required Premium=SW Projected Average Loss & LAE Per Exposure+Projected Average Fixed Expense Per Exposure1:00 ¡ Variable Expense Provision ¡ Profit & Contingency ProvisionThis figure is compared to the statewide projected average premiumat present rates to determine the statewide indicated ratechange:SW Indicated Rate Change=SW Projected Average Required PremiumSW Projected Average Premium at Present Rates ¡ 1:00:Alternatively, the projected average fixed expense per exposurecan be converted to a projected fixed expense provision by