大家用心记在脑子里呀，保证能过关——SOA北美精算师考场往年Course8E真题2005那年（三）
　　8. (8 points) Desperate Housefires (DH) is a property and casualty (P&C) insurance
　　company specializing in home insurance coverage. Smash and Cash (SC) is a property
　　and casualty insurance company specializing in auto insurance.
　　In Our Arms (IOA) is an insurance holding company that wishes to purchase a P&C
　　company. IOA wants to *uate the insolvency risk of DH and SC.
　　IOA plans to implement the following initiatives in the acquired company:
　　? The target for the expected policyholder deficit risk measure will be 2.5% or
　　below.
　　? Dynamic Financial Analysis will be instituted.
　　You are given the following data:
　　Desperate Housefires Smash and Cash
　　Assets: 100 75
　　Scenario px Desperate Housefires
　　Expected Loss
　　Smash and Cash
　　Expected Loss
　　1 0.2 50 50
　　2 0.6 100 70
　　3 0.2 150 100
　　(a) For DH and SC:
　　i. Calculate the expected policyholder deficit for each company.
　　ii. Compare the risk of insolvency of the two companies.
　　iii. Determine the level of additional assets which each company would
　　need to have in order to maintain the target expected policyholder
　　deficit required by IOA.
　　iv. Calculate the capital held by each firm, assuming the additional assets,
　　if any, determined in (iii) are contributed to each company.
　　(b) Describe the purposes and uses of Dynamic Financial Analysis.
　　(c) Describe the elements that should be considered in designing a Dynamic
　　Financial Analysis system for IOA.
　　COURSE 8: Fall 2005 - 9 - GO ON TO NEXT PAGE
　　Enterprise Risk Management Segment
　　Afternoon Session
　　9. (6 points) Windy City Life Insurance Company sells Universal Life and Term insurance
　　to the affluent market. The UL product is a market leader, mainly because it utilizes
　　state-of-the-art and proprietary investment management strategies. The company’s sales
　　have been strong over the last three years and are on pace for another record year.
　　However, the large amount of new business has depleted the company’s capital base.
　　The senior management team at Windy City has identified growth opportunities for the
　　organization, but they need to free up capital in order to pursue those opportunities.
　　Management is contemplating separate financial reinsurance transactions for each of the
　　two lines of business as a way to provide surplus relief. Because the company has never
　　used reinsurance in the past, Windy City would like to keep the reinsurance structure as
　　simple as possible.
　　Windy City has hired you as a consultant on development of a financial reinsurance
　　program.
　　(a) (3 points) Describe the structure of three alternative forms of financial
　　reinsurance and the products for which each is typically used. Include the
　　advantages and disadvantages of each form.
　　(b) (2 points) Taking into account Windy City’s preference for a simple structure,
　　recommend an appropriate financial reinsurance plan for:
　　i. The Term line of business
　　ii. The Universal Life line of business
　　Defend your recommendations.
　　(c) (1 point) Explain uses of financial reinsurance other than surplus relief.
　　COURSE 8: Fall 2005 - 10 - GO ON TO NEXT PAGE
　　Enterprise Risk Management Segment
　　Afternoon Session
　　10. (6 points) Nirvana Novelties is a theme-based organization selling convenience items at
　　gas stations and truck stops throughout North America. Nirvana is a privately held firm
　　with no debt.
　　You are given the following current information for Nirvana:
　　Annual earnings: $7.5 million
　　Assets: $225 million
　　Liabilities: $160 million
　　You are given the following assumptions:
　　Market Capitalization Rate: 10%
　　Effective Tax Rate: 0%
　　Cost of Debt: 9%
　　At a recent trade show in Las Vegas, Nirvana became interested in expanding into themebased
　　key chains. Assume that future investment in the key chain market generates a
　　15% return and that the net present value of this investment will be $50 million.
　　(a) Calculate Nirvana’s book value, tangible value, and the price-to-earnings ratio,
　　prior to expansion and leverage.
　　(b) Calculate the updated price-to-earnings ratio for Nirvana with 50% of the
　　expansion cost financed by debt.
　　(c) Describe the impact on franchise value of assuming an effective tax rate greater
　　than zero.
　　(d) One of your colleagues has asserted that, “regardless of a firm’s financial
　　structure, the fundamental basis for high P/Es is access to substantial franchise
　　investment.”
　　Defend or refute that statement.
　　COURSE 8: Fall 2005 - 11 - GO ON TO NEXT PAGE
　　Enterprise Risk Management Segment
　　Afternoon Session
　　Questions 11-12 pertain to the Case Study.
　　Each question should be answered independently.
　　高顿网校之名人心语：一个人在科学探索的道路上，走过弯路，犯过错误，并不是坏事，更不是什么耻辱，要在实践中勇于承认和改正错误。