Exam6: FASB# 113

[Ali]

1994 part10, Q35's CSM solution:

surplus = $450,000

Can anyone explain how the above value is calculated?

Thanks!

[Westley]

I don't have the CSM, nor do I know the context, but, generally, Surplus = Assets - Liabilities. Anything more complicated than that, you will have to give more context (or find somebody who has the CSM)

[jmls]

Hi Ali,

The point is to recognize what is an asset, what is a liability, what "doesn't matter", then use surplus = assets - liabilities.

Assets: Cash on hand, Market value of bonds, Market value of stocks, amortized book value of bonds

Liabilities: Net loss and LAE reserves, Net unearned premium reserves

"Doesn't matter": Ceded loss and LAE reserves, Ceded unearned premiums reserves (only the net amounts show up on the balance sheet).

Add up the assets, subtract the liabilities, there you go

[Ali]

Thank you jmls!