MODULE 2- LOMA 361 EXAM
QUESTIONS AND ANSWERS. VERIFIED
2026.
Valuation - ANS "the process of calculating the monetary value of an insurer's assets,
liabilities, and owners' equity for accounting and financial reporting purposes."
Historical Cost - ANS "the price originally paid for the asset. This is a simple asset valuation
method because nearly all assets have a readily determinable historical cost. On the date of
purchase, an asset's historical cost equals its book value."
Book value - ANS "the value at which a company records the asset in its accounting records
and reports the asset on its balance sheet."
Amortization - ANS the reduction of a loan balance through payments made over a period of
time
"typically applies to certain long-term assets such as bonds and mortgages, is the periodic and
systematic increase or decrease of the original cost of an investment to its ultimate value at
maturity."
amortized cost - ANS "the asset's book value after its cost has been adjusted for applicable
amortization"
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,Accumulate Depreciation - ANS "The total amount of depreciation allocated to an asset as of
a specified date"
fair value - ANS "the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants on the valuation date."
fair value accounting - ANS The process of valuing a company's balance sheet accounts,
including assets, on the price that the asset would bring in an active, organized market in which
(1) the asset sale is not the result of liquidation, and (2) neither the buyer nor the seller is
forced to enter the transaction.
The purpose is to provide transparent, validated information about the values for a company's
balance sheet accounts.
Securities Valuation Office (SVO) - ANS responsible for the ongoing credit quality assessment
and valuation of securities owned by state-regulated insurance companies.
Automated valuation service - ANS "provides access to the Valuation of Securities (VOS)
database, from which an insurer can quickly price its securities for the Annual Statement."
Realized Capital Gain (Loss)- SAP-debt security - ANS The taxable profit or loss resulting from
the purchase and sale of a security. It is the difference between the sales proceeds and the
investment's cost basis.
"For an asset, the net sales proceeds equal the gross sales proceeds, or selling price, minus any
sales commissions and other costs associated with the sale of the asset. If the net sales
proceeds from the debt security are greater than its book value, then the result is a realized
capital gain; if the net sales proceeds are less than the debt security's book value, then the
result is a realized capital loss."
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Page 31
Unrealized capital gain loss -SAP-debt security - ANS "the difference between the debt
security's fair value and its book value. If the fair value of the debt security is greater than its
book value, then the result is an unrealized capital gain; if the fair value is less than the debt
security's book value, then the result is an unrealized capital loss."
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Realized Capital Gain (Loss)- GAAP- debt security - ANS "the difference between the debt
security's net sales proceeds and its amortized cost. If the net sales proceeds from the debt
security are greater than its amortized cost, then the result is a realized capital gain; if the net
sales proceeds are less than the debt security's amortized cost, then the result is a realized
capital loss."
unrealized capital gain loss- GAAP- debt security - ANS "the difference between the fair value
of the debt security and its amortized cost. If the fair value of a debt security is greater than its
amortized cost, then the result is an unrealized capital gain; if the fair value is less than the debt
security's amortized cost, then the result is an unrealized capital loss."
Realized Capital Gain (Loss)- ES - ANS On a equity security is the difference between the
equity security's net sales proceeds and its historical cost. If the net sales proceeds from the
equity security are greater than its historical cost, then the result is a realized capital gain; if the
net sales proceeds are less than the equity security's historical cost, then the result is a realized
capital loss."
"Under GAAP and SAP, realized and unrealized capital gains on equity securities are generally
calculated the same way"
unrealized capital gain loss- ES - ANS "on an equity security is the difference between the
equity security's fair value and its historical cost. If the fair value of the equity security is greater
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, than its historical cost, then the result is an unrealized capital gain; if the fair value is less than
the equity security's historical cost, then the result is an unrealized capital loss."
Admitted asset - ANS "assets whose full value is reported on the Assets page of the Annual
Statement. Examples are cash, cash equivalents, and most invested assets."
Note that the admitted and nonadmitted asset classifications are only relevant for statutory
reporting purposes; under GAAP accounting, an insurer includes values for all of its assets in its
financial statements. Because of this difference, the asset amounts in an insurer's Annual
Report rarely equal those shown on the Assets page of the insurer's Annual Statement."
Nonadmitted assets - ANS Types of property, such as office furniture and equipment, that
regulators do not allow insurers to show as assets on financial statements because these assets
cannot readily be converted to cash at or near their market value.
prepaid expenses are an example
a lower value for a company's nonadmitted assets ratio indicates a smaller amount of highly
illiquid assets
Partially nonadmitted assets - ANS "only a portion of their value is reported on the Assets
page of the Annual Statement. One example is deferred tax assets."
liquid assets - ANS cash and items that can be quickly converted to cash
Net admitted assets - ANS = Assets - Nonadmitted assets
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4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
QUESTIONS AND ANSWERS. VERIFIED
2026.
Valuation - ANS "the process of calculating the monetary value of an insurer's assets,
liabilities, and owners' equity for accounting and financial reporting purposes."
Historical Cost - ANS "the price originally paid for the asset. This is a simple asset valuation
method because nearly all assets have a readily determinable historical cost. On the date of
purchase, an asset's historical cost equals its book value."
Book value - ANS "the value at which a company records the asset in its accounting records
and reports the asset on its balance sheet."
Amortization - ANS the reduction of a loan balance through payments made over a period of
time
"typically applies to certain long-term assets such as bonds and mortgages, is the periodic and
systematic increase or decrease of the original cost of an investment to its ultimate value at
maturity."
amortized cost - ANS "the asset's book value after its cost has been adjusted for applicable
amortization"
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Accumulate Depreciation - ANS "The total amount of depreciation allocated to an asset as of
a specified date"
fair value - ANS "the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants on the valuation date."
fair value accounting - ANS The process of valuing a company's balance sheet accounts,
including assets, on the price that the asset would bring in an active, organized market in which
(1) the asset sale is not the result of liquidation, and (2) neither the buyer nor the seller is
forced to enter the transaction.
The purpose is to provide transparent, validated information about the values for a company's
balance sheet accounts.
Securities Valuation Office (SVO) - ANS responsible for the ongoing credit quality assessment
and valuation of securities owned by state-regulated insurance companies.
Automated valuation service - ANS "provides access to the Valuation of Securities (VOS)
database, from which an insurer can quickly price its securities for the Annual Statement."
Realized Capital Gain (Loss)- SAP-debt security - ANS The taxable profit or loss resulting from
the purchase and sale of a security. It is the difference between the sales proceeds and the
investment's cost basis.
"For an asset, the net sales proceeds equal the gross sales proceeds, or selling price, minus any
sales commissions and other costs associated with the sale of the asset. If the net sales
proceeds from the debt security are greater than its book value, then the result is a realized
capital gain; if the net sales proceeds are less than the debt security's book value, then the
result is a realized capital loss."
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Page 31
Unrealized capital gain loss -SAP-debt security - ANS "the difference between the debt
security's fair value and its book value. If the fair value of the debt security is greater than its
book value, then the result is an unrealized capital gain; if the fair value is less than the debt
security's book value, then the result is an unrealized capital loss."
Page 32
Realized Capital Gain (Loss)- GAAP- debt security - ANS "the difference between the debt
security's net sales proceeds and its amortized cost. If the net sales proceeds from the debt
security are greater than its amortized cost, then the result is a realized capital gain; if the net
sales proceeds are less than the debt security's amortized cost, then the result is a realized
capital loss."
unrealized capital gain loss- GAAP- debt security - ANS "the difference between the fair value
of the debt security and its amortized cost. If the fair value of a debt security is greater than its
amortized cost, then the result is an unrealized capital gain; if the fair value is less than the debt
security's amortized cost, then the result is an unrealized capital loss."
Realized Capital Gain (Loss)- ES - ANS On a equity security is the difference between the
equity security's net sales proceeds and its historical cost. If the net sales proceeds from the
equity security are greater than its historical cost, then the result is a realized capital gain; if the
net sales proceeds are less than the equity security's historical cost, then the result is a realized
capital loss."
"Under GAAP and SAP, realized and unrealized capital gains on equity securities are generally
calculated the same way"
unrealized capital gain loss- ES - ANS "on an equity security is the difference between the
equity security's fair value and its historical cost. If the fair value of the equity security is greater
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, than its historical cost, then the result is an unrealized capital gain; if the fair value is less than
the equity security's historical cost, then the result is an unrealized capital loss."
Admitted asset - ANS "assets whose full value is reported on the Assets page of the Annual
Statement. Examples are cash, cash equivalents, and most invested assets."
Note that the admitted and nonadmitted asset classifications are only relevant for statutory
reporting purposes; under GAAP accounting, an insurer includes values for all of its assets in its
financial statements. Because of this difference, the asset amounts in an insurer's Annual
Report rarely equal those shown on the Assets page of the insurer's Annual Statement."
Nonadmitted assets - ANS Types of property, such as office furniture and equipment, that
regulators do not allow insurers to show as assets on financial statements because these assets
cannot readily be converted to cash at or near their market value.
prepaid expenses are an example
a lower value for a company's nonadmitted assets ratio indicates a smaller amount of highly
illiquid assets
Partially nonadmitted assets - ANS "only a portion of their value is reported on the Assets
page of the Annual Statement. One example is deferred tax assets."
liquid assets - ANS cash and items that can be quickly converted to cash
Net admitted assets - ANS = Assets - Nonadmitted assets
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