LOMA 361 COMBINED SET EXAM QUESTIONS WITH CORRECT ANSWERS

LOMA 361 COMBINED SET EXAM QUESTIONS WITH CORRECT ANSWERS Guaranteed interest contracts (GICs) - Answer-The contract holder placed one or more deposits with the insurer for a stated period in exchange for repayment of those deposits plus interest at a guaranteed rate Investment contracts - Answer-Long duration contracts that do not expose the insurer to significant risks arising from contract owner mortality. Includes guaranteed interest contracts & most deferred annuities during accumulation phase Gross Paid-in and Contributed Surplus - Answer-Aggregate amount paid above the par value for shares of an insurer's own stock Treasury stock - Answer-Stock that an insurer in the United States had previously issued and then later repurchased at its market price Surplus note - Answer-special type of unsecured debt security issued only by insurance companies Control account - Answer-Summarizes accounting entries and monitors the expenses that are reported in a company's financial statements Liquidity ratio - Answer-Assets / liabilities Current ratio - Answer-Current assets / current liabilities Nonadmitted assets ratio - Answer-Nonadmitted assets / surplus General expense ratio - Answer-General insurance expenses / premiums and considerations Benefits ratio - Answer-Benefits paid / premiums and considerations Operating leverage - Answer-The effect whereby incurring fixed operating costs automatically magnifies a company's risks and potential returns Financial leverage - Answer-The effect whereby incurring fixed financial costs automatically magnifies a company's risks and potential returns Total leverage - Answer-The combined effect of operating leverage and financial leverage, which automatically magnifies a company's risks and potential concerns Basic leverage ratio - Answer-Liabilities / Capital Insurance leverage ratio - Answer-Contractual reserves / capital and surplus Debt to surplus ratio - Answer-Total liabilities / surplus Capital and surplus ratio - Answer-Capital and surplus / total liabilities RBC ratio - Answer-Total adjusted capital / Authorized Control level risk based capital Capital ratio - Answer-Capital / total liabilities Profitability ratio - Answer-Net income or gain from operations / Assets invested or equity used to gain net income or gain Return on equity - Answer-Net equity / average owners' equity Return on assets ratio (ROA) - Answer-Net income / Average total assets Investment ratio - Answer-Net investment income / average invested assets Net profit margin - Answer-Net income / total revenues Responsibility accounting - Answer-A people oriented system of policies and procedures that allows for revenues, expenses and investments to be assigned to the specified employee or organizational level that is accountable for those items Controllable cost - Answer-a cost over which a responsibility manager has decision-making authority Cost object - Answer-Any purpose for which a company measures costs Indirect cost - Answer-A cost that cannot be identified specifically with a single cost object Positive variance - Answer-A greater amount than expected. Is bad when this happens to expenses Negative variance - Answer-A smaller amount than expected. This is good when it happens to expenses Rate variance - Answer-(Actual rate - standard rate) x actual number of units sold or processed Usage variance - Answer-(Actual quantities sold or processed - budgeted quantities sold or processed) x standard rate Total variance - Answer-Rate variance + usage variance Responsibility report - Answer-A management accounting report that itemized standard (budgeted) and actual amounts that are under the responsibility manager's sphere of control and indicates the corresponding variance for each revenue or cost Segment report - Answer-A type of responsibility report that shows revenues and expenses - divided into fixed and variable components and direct and indirect costs - for a single responsibility center Mean liabilities method - Answer-Allocates investment income to lines of business based on the reserves that are attributable to each line Investment year method - Answer-Forms separate investment pools that contain the investments made during each year, then a share of the investment pool for each calendar year is allocated to each line of business