The ABC Insurance Company is having the following financial performance this year: Premiums $ 650...
90.2K
Verified Solution
Link Copied!
Question
Accounting
The ABC Insurance Company is having the following financial performance this year: Premiums $ 650 Claims 470 Loss Adjustment Expenses 60 Underwriting Expenses 115 Underwriting Gain $ 5.00 Expectations for Next Year: Required Capital 1/3 rd of Premiums Growth in Claims Frequency 3.00% Severity 2.00% Claims Timing: Paid out evenly over 18 months (that is, use an n of .75) Growth in Loss Adjustment Expenses (LAE) Frequency 2.50% Severity 2.00% LAE Timing: Same as Claims Growth in Underwriting Expenses: 2.25% Underwriting Expense Timing: Same as Claims Investment Return: 3.50% Required Return on Capital: 7.00% (Note: Return is reduced by a charge for change in required capital) Given the above, determine which premium, $672.16 or $718.86, best meets the firms objectives. Show all of your work and calculations for full credit
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.