Investment Income + Find Loss Ratio Question

[Darkness Falls]

In the question where we had to find the undiscounted + discounted loss ratio for 2007 & 2008 we needed to first calculate the investment income for 2008.
How did you guys do that part?

[QuickBuBa]

they gave us the investment yield which was also 4%.

Basically for AY 2008 we would have invested the assets associated with our liabilities for one year only.

An estimate of the investment income from those assets would then be in my opinion 4% * Unpaid Claim liabilities (I used discounted + PfaDs since this would be the amount reported in the statement)

What do you think?

[Darkness Falls]

I used undiscounted * the yield. Discounted would make sense though.

Don't recall seeing that in the readings anywhere so I was a little stuck there.

[skittles]

I put 0.

I think investment income from unpaid claims means the investment income you derive from unpaid claims liability right? since the statement was as at Dec 31, 2008, there wouldn't have been unpaid at the beginning of the year for the insurer to invest?

[QuickBuBa]

I disagree, it is not because you value them at the end of the year that there is no investment income coming from them. After all they are match with assets and these assets were in your possession at the begining of the year. So they did generate one year of investment income...

Also the 2008 exam question had investment income for their last year AY...

[Darkness Falls]

I disagree, it is not because you value them at the end of the year that there is no investment income coming from them. After all they are match with assets and these assets were in your possession at the begining of the year. So they did generate one year of investment income...

Also the 2008 exam question had investment income for their last year AY...

Agree. Meh worst case what was the loss of point here if you got the rest of the question perfect 0.5?

[skittles]

Yeah, not really sure. I only deduced that because there's no inv income from UCAE for the latest AY in 60.41. But yes I did take some liberty to guess because the point value was small. :-)

[Lard]

I just took the average of the beginning and end year values of the loss reserve, so (0+1800)/2=900, times the yield.

[QuickBuBa]

Damn...your right, if you check the Memorandum Appendix, it says that we must calculate the investment income according to the educational note on run-off of claim liabilities. so the correct answer would be (1800+0)/2*4%

Good Job

[Lard]

Damn...your right, if you check the Memorandum Appendix, it says that we must calculate the investment income according to the educational note on run-off of claim liabilities. so the correct answer would be (1800+0)/2*4%

Good Job

Wow. I mean, I was thinking of the run-off procedure when I did it, but I didn't know it was actually correct.

[Darkness Falls]

Divide my 2, hum that would of made sense. Oh well oups there!

[Smiss]

FWIW, I averaged the Discounted LR's w/PFADs for AY 2007 and 2008.

[USTC]

FWIW, I averaged the Discounted LR's w/PFADs for AY 2007 and 2008.

Same here.....:oops: