这里有有SOA经典真题November2003Course8F（1）——北美精算师，赶紧来高顿网校北美精算师频道学习吧。
　　COURSE 8: Fall 2003 1 GO TO NEXT PAGE
　　FINANCE
　　Morning Session
　　**BEGINNING OF EXAMINATION**
　　FINANCE
　　MORNING SESSION
　　Questions 1-5 pertain to the Case Study.
　　Each question should be answered independently.
 
　　1. (8 points) Mr. Newman has just given J. Peterman the unaudited line-of-business and
　　consolidated financials of NADA for 2002 along with projections for 2003-2005. In
　　addition, NADA has supplied Peterman with an extensive business plan detailing the
　　growth potential and opportunity for each of its business units.
　　The business plan contains an emphasis on growing the GIC business. Mr. Newman
　　plans to do this through the addition of Funding Agreements with 12-day put options.
　　The Funding Agreements will be sold to institutional investors other than retirement
　　plans.
　　Peterman is concerned about NADA’s growing reliance on GIC sales. Peterman has
　　questions about the profitability, liquidity, and investment risks of the GICs.
　　Mr. Newman has asked you to address the rating agency’s concerns.
　　(a) Explain why Peterman may have concerns about increased Funding Agreement
　　sales and their effects on profitability, liquidity, and investment risk.
　　(b) Peterman has recently adopted a view of interest rate risk similar to Moody’s
　　Investor Service. Summarize Moody’s view of interest rate risk, and describe the
　　impact that such views could have on Peterman’s *uation of NADA’s current
　　and planned GIC business.
　　COURSE 8: Fall 2003 2 GO TO NEXT PAGE
　　FINANCE
　　Morning Session
　　Questions 1-5 pertain to the Case Study.
　　Each question should be answered independently.
 
　　2. (10 points) In preparation for the upcoming rating agency meeting with J. Peterman,
　　Chief Actuary Kramer has been asked to look into improving the RBC ratio of the term
　　life block. His preference is to change the asset mix backing the product.
　　Manzier Reinsurance has offered to coinsure 35% of NADA’s term life block.
　　(a) (1 point) Calculate the required capital for year-end 2003 for the term life block
　　of business prior to any reinsurance. Show your work.
　　(b) (2 points) Propose terms for the reinsurance transaction with Manzier that would
　　optimize NADA’s RBC ratio for the term life block of business.
　　(c) (3 points) Calculate the required capital for year-end 2003 for the term life block
　　if the reinsurance deal you proposed is consummated. Show your work.
　　(d) (2 points) Calculate the impact of your proposed reinsurance arrangement on
　　NADA’s year-end 2003 RBC ratio. Assume no change to available surplus.
　　Show your work.
　　(e) (2 points) Predict Manzier’s response to the terms of the reinsurance arrangement
　　proposed in part (b).
　　COURSE 8: Fall 2003 3 GO TO NEXT PAGE
　　FINANCE
　　Morning Session
　　Questions 1-5 pertain to the Case Study.
　　Each question should be answered independently.
 
　　3. (12 points) NADA’s business plan projects increased sales of GICs beginning in 2003.
　　To achieve this plan, the Marketing Department has instituted a commission scale for
　　GIC products sold in 2003, as follows:
　　?  a commission payment of 1% of deposits for GICs with 5-year interest rate
　　guarantees
　　?  a commission payment of 0.2% of deposits for GICs with 1-year interest rate
　　guarantees
　　?  commissions are paid at the time of sale to the broker.
　　Von Nostrum has recommended that NADA start deferring acquisition costs with respect
　　to its new business. Elaine Benes has put you in charge of creating a methodology to
　　capitalize and amortize acquisition costs in accordance with U.S. GAAP.
　　You start by focusing on the GIC line. Assume the following:
　　?  NADA’s GICs are FAS 97 investment contracts.
　　?  All GICs are sold at the beginning of the year.
　　?  There are no withdrawals prior to maturity.
　　? =
　　472;Interest earned is paid to the contract holder on December 31 of each year.
　　?  For assets backing the GIC business sold in 2003, NADA expects to earn an
　　investment return of 4.295%.
　　?  Expenses are 5 basis points per year.
　　(a) Describe the procedure for determining the capitalization of the acquisition
　　expenses and the subsequent amortization of the DAC asset for the GIC line.
　　(b) Calculate the DAC asset for new business planned to be written in 2003 for the
　　GIC line. Show your work.
　　(c) Calculate the amortization schedule for the DAC asset from part (b). Show your
　　work.
　　COURSE 8: Fall 2003 4 GO TO NEXT PAGE
　　FINANCE
　　Morning Session
　　3. Continued
　　(d) Assume through 2004 that no assumptions have changed from 2003. Assume that
　　on January 1, 2005, there are defaults within the investment portfolio which
　　reduce future investment income to NADA by 0.20% per annum. Calculate the
　　impact that this event will have on NADA’s balance sheet and income statement
　　for the GIC business originally written in 2003. Show your work.
　　(e) Following your GIC analysis, you consider the implications of Von Nostrum’s
　　recommendation for NADA’s other business lines.
　　Explain the likely reasons why Von Nostrum has recommended deferring
　　acquisition costs, and describe the considerations impacting the capitalization and
　　amortization of acquisition costs associated with each of NADA’s business lines.
 
　　4. (3 points) Outline a report analyzing the strengths and weaknesses of NADA’s corporate
　　governance system.
 
　　5. (9 points) NADA is currently under review with negative implications by the J.
　　Peterman rating agency.
　　(a) Describe which current operations and corporate attributes of NADA help to
　　maintain or improve its rating and which may hurt the rating.
　　(b) Propose changes to its business strategy that NADA can implement to improve its
　　rating. Include justification for your proposed changes.
　　COURSE 8: Fall 2003 5 GO TO NEXT PAGE
　　FINANCE
　　Morning Session
 
　　6. (4 points) XYZ Company uses the expected policyholder deficit as the relevant risk
　　measure for solvency analysis. XYZ’s total assets are currently $10,000 and have been
　　invested to earn a guaranteed return of 5% over the next year. XYZ has two lines of
　　business with perfectly correlated liability exposures. The total loss for the two lines
　　combined at the end of the year is a random variable that is distributed as follows:
　　x Pr[X=x]
　　$8,000 15%
　　10,000 60
　　12,000 25
　　(a) Calculate the expected policyholder deficit ratio. Show your work.
　　(b) If the regulator requires that capital be held such that the expected policyholder
　　deficit does not exceed 5% of expected losses, determine XYZ’s current position
　　relative to this requirement. Show your work.
　　(c) Describe how the owners of XYZ hold a position similar to a stock option.
 
　　7. (8 points) As the Product Innovator at In the Box Co., you developed an idea for a new
　　product line and pitched it to your boss, Jack, who is the Vice President of Marketing.
　　Thinking this concept is a good strategic fit and recognizing value based on features
　　already traded in the market, Jack requests that you develop the idea further.
　　You use the traditional discounted cash flow (DCF) approach to analyze the idea.
　　Unfortunately, you discover that this project produces a NPV of -50 using the DCF
　　approach.
　　(a) Explain why Jack’s initial assessment of the project does not seem to reconcile
　　with the value calculated under the traditional DCF approach.
　　(b) Describe how you would enhance the DCF approach to consider the additional
　　value that Jack sees.
　　(c) Indicate the complications presented by the approach you proposed in part (b).
　　COURSE 8: Fall 2003 6 STOP
　　FINANCE
　　Morning Session
 
　　8. (6 points) As a financial consultant to Golden Parachute Company, you have b
　　een asked
　　to make a recommendation to the Board of Directors regarding the funding of the
　　company’s defined benefit pension plan. The board is split between those that feel the
　　plan is too heavily funded (and would like to take a plan reversion) and those that feel the
　　funding status of the plan is not sufficient due to the level of equity exposure. A law has
　　just been passed that will prevent companies from taking a pension plan reversion, but it
　　does not become effective until the next plan year.
　　You have the following information available:
　　?  Market value of plan assets = $65,400,000
　　?  Present value of liability by accounting standards = $60,000,000
　　?  Present value of liability by actuarial standards = $63,000,000
　　?  Assumed rate of return for plan valuation purposes = 8.5%
　　?  Plan early retirement provis ion(s) = none
　　?  Plan normal retirement age = 65
　　?  Amount of liability by accounting standards attributed to employees age 60 or older =
　　$36,000,000
　　?  Minimum required contribution for the plan year in question = $0
　　?  Maximum tax-deductible contribution for the pla n year in question = $1,000,000
　　?  Asset Allocation: 50% Stocks
　　25% High yield bonds
　　20% Municipal bonds
　　5% Cash
　　Upon a participant’s retirement, the plan liquidates assets to purchase a life annuity to
　　cover the participant’s future benefit payments.
　　(a) Outline the advantages and disadvantages of overfunding a defined benefit
　　pension plan.
　　(b) Recommend the funding related action that Golden Parachute’s Board of
　　Directors should take. Support your recommendation.
　　(c) Recommend whether any changes should be made to the asset allocation or
　　assumptions utilized in the pension plan’s annual valuation. Include support for
　　your recommendation.
　　**END OF EXAMINATION**
　　MORNING SESSION
　　COURSE 8: Fall 2003 - 7 - GO ON TO NEXT PAGE
　　Finance
　　Afternoon Session
　　**BEGINNING OF EXAMINATION**
　　FINANCE
　　AFTERNOON SESSION
　　Beginning With Question 9
 
　　9. (4 points) Martha, the CEO of a large life insurer, has contacted you, a consulting
　　actuary, with concerns regarding fair value accounting.
　　(a) Describe the differences between fair value and entity specific valuations.
　　(b) Explain the impact that a downgrade in the firm’s credit standing would have
　　under both valuation methodologies.
　　(c) Martha notes that the market value of many of the company’s liabilities is not
　　available. Describe a fair value accounting methodology that can be used for
　　valuation purposes under these circumstances and the principles underlying this
　　methodology.
　　COURSE 8: Fall 2003 - 8 - GO ON TO NEXT PAGE
　　Finance
　　Afternoon Session
 
　　10. (14 points) “Hemlock Inc. poisons investors as it files Chapter 11 bankruptcy - $2
　　billion of corporate bond defaults – stock is delisted.”
　　That was the headline that three business people faced as they scanned the business
　　section of the morning paper.
　　Dominic is a Portfolio Manager for the Parthenon Investment Grade Bond Fund, a fund
　　that attracts investments from smaller insurance companies. Dominic had relied on
　　private sector watchdogs when he purchased newly issued Hemlock Inc. debt for the fund
　　just six months ago. At that time, and as recently as last week, various NRSROs had
　　rated Hemlock BBB or its equivalent.
　　Isabel is the head of the Investment Committee for Mt. Olympus Insurance Company
　　(MOIC), Parthenon’s largest investor. MOIC’s liabilities consist of 75% whole life
　　insurance and 25% fixed deferred annuities. In addition to a significant investment in
　　Parthenon, MOIC has additional Hemlock debt and a small stock position in Hemlock.
　　As a result, MOIC had greater exposure to He
　　mlock than its peers. MOIC is currently
　　rated B++ by A.M. Best. A review meeting with A.M. Best is scheduled for later in the
　　week due to the arrival of a new CEO at MOIC and dwindling life insurance sales.
　　Nicholas, the Chief Actuary for MOIC, chairs the committee that meets with and
　　responds to requests by the insurance rating agencies. He received a phone call this
　　morning from the MOIC analyst at Standard & Poor’s, who asked for a meeting with the
　　MOIC committee next week to discuss the impact of the Hemlock bankruptcy.
　　(a) (6 points) Dominic had a voice mail from Isabel upon arrival at his desk. She
　　demands to know how his fund could be holding such a large position in a
　　company that has gone bankrupt.
　　Formulate a response to Isabel that includes the following:
　　(i) Explain what a rating issued by an NRSRO means.
　　(ii) Explain how an NRSRO collects and uses information to arrive at a rating.
　　(iii) Describe the shortcomings of NRSROs that could explain how Hemlock
　　was rated investment grade at the time of its default.
　　(iv) Describe attempts by NRSROs to mitigate these shortcomings.
　　(b) (4 points) Nicholas grills Isabel on her conversation with Dominic before racing
　　upstairs to brief the new CEO on the upcoming meeting with A.M. Best.
　　(i) Explain how A.M. Best arrives at a company rating.
　　(ii) Suggest steps that MOIC can take to manage the ratings process with
　　A.M. Best.
　　COURSE 8: Fall 2003 - 9 - GO ON TO NEXT PAGE
　　Finance
　　Afternoon Session
　　10. Continued
　　(iii) Predict the action that A.M. Best will take with respect to MOIC’s rating
　　and the basis for that action.
　　(iv) Predict possible ramifications of A.M. Best’s action.
　　(c) (4 points) The new CEO’s bonus is partially dependent on maintaining or
　　improving MOIC’s ratings and partially dependent on revamping MOIC’s
　　dwindling life insurance sales, which are down 30% from three years ago.
　　Focusing on the upcoming Standard & Poor’s meeting, he asks Nicholas to
　　determine the impact of recent events.
　　You are given the following tables of information regarding MOIC, updated to
　　reflect the Hemlock event.
　　ASSET % OF PORTFOLIO
　　Cash 5%
　　U.S. government securities 15%
　　NAIC 1 – public corporate bonds 25%
　　NAIC 2 non-144(a) private placements 30%
　　Non-investment grade bonds 5%
　　Common stock 20%
　　YEAR ANNUAL EARNINGS
　　ADEQUACY RATIO
　　2002 170%
　　2001 190%
　　2000 185%
　　1999 200%
　　1998 225%
　　(i) Describe the impact of the Hemlock event on MOIC under the Standard &
　　Poor’s Capital Adequacy model.
　　(ii) Describe how Standard & Poor’s would view MOIC’s liquidity.
　　(iii) Calculate the current weighted average Earnings Adequacy Ratio and
　　comment on the prospects for 2003’s Earnings Adequacy Ratio. Show
　　your work.
　　COURSE 8: Fall 2003 - 10 - GO ON TO NEXT PAGE
　　Finance
　　Afternoon Session
 
　　11. (8 points) You are the pricing actuary for a multi-national reinsurance company, ABC
　　Re. WXY Life has approached you regarding a transaction that wo uld efficiently utilize
　　WXY Life’s expiring tax loss carry forwards (TLCF).
　　Note the following:
　　?  WXY Life is rated BBB- by a well known credit rating agency.
　　?  None of WXY Life’s existing business is currently reinsured.
　　?  Local regulations prohibit WXY Life from taking a reserve credit for reinsurance.
　　?  ABC Re does not currently have a relationship with WXY Life.
　　Below is WXY Life’s projected statutory income:
　　WXY Life’s Projected Statutory Income
　　Year Pre-tax Statutory Income Expiring TLCF
　　2003 -2 10
　　2004 2
　　2005 4
　　2006 5
　　2007 6
　　2008 8
　　2009 8
　　2010 8
　　2011 8
　　2012 8
　　You have decided to propose a modified coinsurance structure effective December 31,
　　2003 with the following features:
　　?  Retention equals 25% of all existing bus
　　iness.
　　?  The risk charge equals 4% of beginning of year Outstanding Surplus Account (OSA).
　　?  The modified coinsurance interest rate equals LIBOR + 3%.
　　?  WXY Life can recapture the block of business once the OSA balance reaches zero.
　　?  The initial reinsurance allowance will efficiently use the expiring TLCF.
　　(a) (5 points) Assume all reinsurance accounts are settled at the end of each calendar
　　year and LIBOR equals 4% throughout the projection period. Based on the above
　　projection, determine when WXY Life can recapture the block of business. Show
　　your work.
　　COURSE 8: Fall 2003 - 11 - GO ON TO NEXT PAGE
　　Finance
　　Afternoon Session
　　11. Continued
　　(b) (2 points) Comment on the appropriateness of the level of the risk charge being
　　offered by ABC Re.
　　(c) (1 point) Identify the conditions that should be included in this financial
　　reinsurance treaty in order to gain state regulator acceptance.
　　12. (5 points) Spencer Life is a medium-sized life insurance corporation with approximately
　　$100 million in assets under management. The Chief Investment Officer has asked you
　　to *uate a tax-structured deal offered by an investment broker. The following details
　　have been provided:
　　?  Proceeds of the investment are given to the Federal Housing Corporation, a
　　government-sponsored corporation that builds and rents low-income housing.
　　?  The investment pays a quarterly coupon of LIBOR + 100 basis points.
　　?  50% of the interest income from the investment is deductible for federal tax purposes.
　　?  Alternative investments that are fully taxable and have similar credit risk currently
　　yield 125 basis points over LIBOR.
　　?  The minimum investment is $1 million.
　　?  Current LIBOR is 1.50%.
　　?  The Federal Tax Rate is 35%.
　　If Spencer decides to participate in the investment, an interest rate swap will be used to
　　improve the match between the cashflows from the investment and the corporation’s
　　fixed-rate liabilities.
　　(a) Analyze the potential benefits and costs of participating in the tax-structured deal.
　　(b) Recommend how to use the FAS133 hedge accounting rules to minimize net
　　income volatility.
　　(c) Describe the impact on the financial statement and the documentation
　　requirements under your recommended approach in part (b).
　　COURSE 8: Fall 2003 - 12 - GO ON TO NEXT PAGE
　　Finance
　　Afternoon Session
　　13. (17 points) Nougat Inc. is a small regional producer of chocolate confectionaries. The
　　founder and CEO of the company recently retired and placed the company up for sale.
　　Butterscotch Inc., Caramel Inc., and Fudge Inc. are all confectionary companies that plan
　　to make bids for Nougat.
　　?  Butterscotch has been a national manufacturer of a variety of candy bars for over 100
　　years. Butterscotch is 100% owned by a private trust.
　　?  Caramel is a mature multi- national conglomerate that has been in some aspect of the
　　confectionary business for over 300 years. Over the past decade management has
　　been pursuing growth through a small number of strategic acquisitions.
　　?  Fudge was started five years ago after Fudge’s founder cashed out of his internet
　　company and was inspired after reading about a young boy’s trip to a chocolate
　　factory. The financial press has called Fudge “innovating – not imitating – a hip
　　company that is taking a shot at bringing growth back to the chocolate business’
　　bottom line and waist- line”.
　　Assume the following:
　　?  All physical assets are owned by corporations.
　　?  Capital markets are frictionless. There are no corporate or personal income taxes,
　　securities ca
　　高顿网校之精品语录：青年人持久地处于一种类似陶醉的状态中，因为青春时代是甜蜜的，而且是在成长中。——亚里士多德