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Sydney
06-13-2011, 04:42 PM
When calculating ROE, how do we know whether to use Average Owners' Equity or Average Policyholders' Surplus as the denominator?

The Book states to use Average Owners' Equity for GAAP and Average Policyholders' Surplus for SAP. However, there is a sample exam question that doesn't specify which rule to use and the answer uses Policyholders' Surplus. Yet in the Flash Cards provided as study materials, the definition uses Owners' Equity, which seems contradictory?

Colymbosathon ecplecticos
06-13-2011, 06:55 PM
When calculating ROE, how do we know whether to use Average Owners' Equity or Average Policyholders' Surplus as the denominator?

Is the company a stock company (GAAP) or a mutual (SAP)?

... Yet in the Flash Cards provided as study materials ...

??? by whom?

burly189
06-14-2011, 09:51 AM
I also noticed this question in the practice exam and was confused.

??? by whom?

The SMART Study Aids, available as a supplement to the online material, contains review notes and flashcards.

Vorian Atreides
06-14-2011, 09:58 AM
??? by whom?
To be more clear, these are produced by The Institutes (who also develop/administer the "final exam").

Colymbosathon ecplecticos
06-14-2011, 09:59 AM
None of those are official study material.

herr blau
06-14-2011, 12:49 PM
When calculating ROE, how do we know whether to use Average Owners' Equity or Average Policyholders' Surplus as the denominator?

The Book states to use Average Owners' Equity for GAAP and Average Policyholders' Surplus for SAP. However, there is a sample exam question that doesn't specify which rule to use and the answer uses Policyholders' Surplus. Yet in the Flash Cards provided as study materials, the definition uses Owners' Equity, which seems contradictory?

Page 8.10 of the review notes states that mutuals only use SAP while stock companies calculate both SAP and GAAP

Sydney
06-14-2011, 02:40 PM
There it is, Thank You.

I've realized there can be one or two key words in a question that cannot be glossed over. This question begins as "Cintriell Mutual Insurance Company" --- meaning use SAP.

Thanks.