Actuarial Task | Acemyhomework Writers
Fundamentals of Actuarial Practice: Interim Assessment Questions
This assessment comprises 14 questions you are to answer. All questions are listed in this document. Questions are grouped into the following sections:
Your answers to the questions are to be contained in one Microsoft Word document that you will submit when completed with the Interim Assessment. You must use the template document (either “IA_template.doc” or “IA_template.docx”) that you downloaded when obtaining this document and the spreadsheets. You will also submit the spreadsheet containing the work you complete for the first scenario (Questions 1 – 5). (Further information about the process for completing the Interim Assessment can be found by clicking the “Interim Assessment FAQ” or “Interim Assessment Instructions” links on the Download Page.)
Important Notes
All information you want to convey to graders must be in your Microsoft Word document. Your answers should be presented with an 11-point (minimum) font and single-spaced (with double spacing between paragraphs).
You should not assume that graders will examine the Microsoft Excel spreadsheet you upload. While graders will have access to your Excel file, they will only review your spreadsheet if they would like to check your work.
For the most part, your answers are not expected to be in memo form and do not need to be in structured paragraphs. It is acceptable to use outlines and lists where you believe it is appropriate. However, if the question calls for you to write a memo or document that is intended for an audience other than the grader, then the communication should be appropriate for that audience.
Your goal should be to answer each question completely and appropriately. You should effectively and efficiently convey the information that answers each question. Your answers should average approximately one page (single-spaced).
Your name should not appear anywhere in your submission or in any way identify you as the author. If you believe you should refer to yourself in the context of an answer, use “FAP Candidate” instead of your actual name.
You work for Sensible Insurance Company, a mid-sized insurance company whose core product is group term life. Sensible aims to grow and is trying to gain Mammoth Mart as a client. Mammoth Mart is a large employer in the U.S., and its addition will almost double the number of insured lives Sensible covers.
Sensible operates in all states in the U.S., but focuses on small to medium sized businessesconcentrated in the Eastern U.S. Its current book of business has an average occupation mix of 20% blue-collar/80% white-collar. The average case size is 81 lives with no single group comprising more than 2% of the insured lives.
The CFO of Sensible is concerned that it may be growing too fast and has asked you to analyze the effect of adding Mammoth Mart as a client. Your student actuary has sent you the following information about Mammoth Mart:
Mammoth Mart wants a simple plan for its employees–all of them will be covered, and the face amount will equal the employee’s annual salary. However, instead of a typical one-year rate guarantee contract with premiums paid monthly, Mammoth Mart would like a three-year rate guarantee on the premium. It will pay the entire three years’ premium up-front based on its current workforce and salaries, with monthly adjustments based on increases or decreases to the covered salary amount.
Ideally, for such a large group we would want to use Mammoth Mart’s own experience to develop a rate, but this is the first time it has sought life insurance coverage. Therefore Sensible’s rate manual needs to be used.
A spreadsheet, which can be downloaded by clicking the “Excel File Group Term” link on the Download Page, has been prepared to assist you with the questions. Further description of the spreadsheet will be provided in the questions.
You notice that using the assumed premium from (1A), the profit is greater than 3% of the claims. Briefly explain why this is and recommend a premium that matches the profit goal.
Premiums for both (A) and (B) (monthly cost / $1000 covered payroll) should be rounded to the nearest tenth of a cent.
Using the monthly cash flow model located in
For Questions 2-5, if a premium is needed in your calculations use the premium from 1(B).
What are the key external factors that Sensible should consider when determining whether or not to pursue the Mammoth Mart account? How do these factors apply to this specific situation?
Up until this point management has wanted you to use a 3.0%
investment income rate. However, because investment income plays an
important role in the case of Mammoth Mart you want to explore it in
more depth. Using the historic data for different asset classes located
in
Before you give your final recommendation to the CFO regarding the Mammoth Mart contract, you decide it would be best to perform some sensitivity testing. Discuss the assumptions that you should consider when performing a sensitivity analysis. Explain why each of these assumptions is important to analyze. Do not perform the sensitivity analysis.
Three years have passed and you have been asked to evaluate the Mammoth Mart deal. Mammoth Mart has expressed interest in a renewal quote.
Mammoth Mart’s experience has been summarized by your actuarial student in Term, tab GT 6>. Note that the Canadian expansion has not yet
occurred and talks with Pacific Pro Shopper have been delayed past the
30-month mark initially anticipated. Actual expenses for Sensible have
been equal to those in the original assumptions. Note: Be sure to save your spreadsheet calculations
showing your work for the group term scenario. You will be prompted to
upload this saved spreadsheet when you have completed the Interim
Assessment. Your company, Awesome Benefits Company, sells the following individual disability insurance product. You have assigned your actuarial student, Joe, to build a pricing
model. Joe has built the model in the Excel spreadsheet Given the recent economic volatility, Awesome Benefits Company has a
conservative investment strategy. The investment strategy has three
priorities; first it is required to hold at least a certain percent of
its portfolio in liquid, short-term assets. The value can be found on
the “Documentation” tab of the spreadsheet Awesome Benefit Company uses profit as a percent of premium as its
primary profit measure. Using a discount rate of 5%, the required
present value of distributable earnings as a percentage of premium is
9%. Management also desires an IRR greater than 12%. For this assessment, you can ignore the claims paying ability of the
company and any other plan design features not mentioned in this
assessment. Do not audit the model. Now that the pricing model is built in Company’s investment managers have asked you what type of assets
should be purchased to back reserves and capital. You have been asked to
assess and comment on its investment strategy. © 2019 Acemyhomework Writers - WordPress Theme by Kadence WP
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