Business Commons^™

Sensitivity Testing Of Prdperty/Casualty Cash Flows, Ralph S. Blanchard Iii, Eduardo P. Marchena

Journal of Actuarial Practice (1993–2006)

The paper outlines an approach that has evolved at Aetna through ten years of property/casualty insurance cash flow testing. Methodologies and approaches to setting parameters reflecting both default and call/prepayment risk are discussed for major invested asset categories. Modeling runoff cash flows for a base scenario (and, for some of these assets, shocked scenarios) also is examined for major non-invested asset categories. Loss reserve cash flow modeling is not addressed, except for a brief description of one approach to shocking projected flows. Finally, various alternatives are given for presenting cash flow testing results to management and non-actuarial audiences.

Surveillance Of Life Insurer Solvency: A Comparison Of Stock And The Multiple Scenario Cash Flow Financial Stress Tests, Ronald W. Spahr, Paul L. Gronewoller

Journal of Actuarial Practice (1993–2006)

The solvency of life insurance companies may be threatened by interest rate risk when the maturities of assets and liabilities are mismatched. The National Association of Insurance Commissioners' (NAIC) multiple scenario cashflow test (MSCFT) and the Office of Thrift Supervision (OTS) net portfolio value model (stock) approaches to financial stress tests are illustrated and analyzed with respect to their capacity to estimate the impact of potential changes in interest rates on life insurance company capital and surplus. Each approach is illustrated with the assets and liabilities of three hypothetical life insurance company capital levels (high, average, and below average) and …

Discussion Of Brian Jones' "Actuarial Conservatism: Not In Public Sector Defined Benefit Pension Plans", Richard Daskais

Journal of Actuarial Practice (1993–2006)

No abstract provided.

Hiv, Aids, Markov Processes, And Health And Disability Insurance, Steven Haberman

Journal of Actuarial Practice (1993–2006)

This paper presents a Markov model of the transmission and development of HIV and AIDS. The Markov model is used to derive functions needed in the calculation of disability insurance premiums, reserves, and cash flows. An application to health insurance and disability insurance is provided.

Life Insurer Risk-Based Capital: An Option Pricing Approach, Samuel H. Cox, Arthur M.B. Hogan

Journal of Actuarial Practice (1993–2006)

This paper uses an option pricing framework to estimate life insurer risk-based capital. Stock market data and statutory asset and liability data are used to calculate the implied level of statutory risk-based capital for each of 18 insurers. We calculate the level of risk-based capital required to avoid subsidy from the guaranty fund. Our results suggest that less capital is required than that required under the New York actuarial risk-based capital formula. Firm rankings, however, are similar under both methods, although the methods are not directly comparable. We also determine the level of capital required if the subsidy provided to …

Model Year Rating For Automobile Liability And Injury Coverages, Leonard T. Guarini, Edward P. Lotkowski

Journal of Actuarial Practice (1993–2006)

This paper is intended to stimulate further research and discussion on the validity and utility of model year rating for personal automobile coverages other than physical damage. Using data from a single insurer and some elementary statistical techniques, we provide evidence supporting model year as a classification variable for automobile liability and injury coverages.

Actuarial Conservatism: Not In Public Sector Defined Benefit Pension Plans, Brian A. Jones

Journal of Actuarial Practice (1993–2006)

Most actuaries tend to be conservative, and most, including this writer, probably would be happy to be so categorized. But actuarial conservatism may not be the best rule in defined benefit public sector pension plans. This paper argues that it is not appropriate for actuaries to employ conservatism assumptions in such public sector plans.

A Pension Plan Incorporating Both Defined Benefit And Defined Contribution Principles, Zaki M. Khorasanee

Journal of Actuarial Practice (1993–2006)

We propose a defined contribution pension plan with an explicitly defined benefit formula. Such a plan is expected to pay more stable and predictable benefits over time than one based on the money purchase principle. The properties of the plan are investigated through simulation. Methods for distributing surpluses and eliminating deficiencies that involve adjusting the rate of benefit accrual (rather than varying the rate of contribution) are discussed. The behavior of the plan under a scenario of persistently unfavorable investment experience is Simulated, and methods for satisfactorily dealing with such a scenario are considered. The plan actuary is expected to …

Measuring And Managing Catastrophe Risk, Ronald T. Kozlowski, Stuart B. Mathewson

Journal of Actuarial Practice (1993–2006)

We introduce some of the basic principles behind property catastrophe modeling via simulations. The output of such simulations can be explored via modernized pin maps and loss likelihood curves. We also briefly discuss some of the uses of catastrophe modeling in addition to traditional probable maximum loss estimation. Comments are made on the use of modeling by reinsurers. We hope that this article stimulates discussions on new approaches to catastrophe modeling.

Simulation Of Investment Returns For A Money Purchase Fund, Zaki M. Khorasanee

Journal of Actuarial Practice (1993–2006)

This paper examines the problem of investment risk in money purchase pension plans. The disadvantages of modeling equity returns as independent, identically distributed random variables are conSidered, and a modified stochastic model of equity returns is proposed. This modified stochastic model is used to estimate the variability in a plan member's retirement fund and to compare various alternatives to investing 100 percent of the assets in ordinary shares. Varying conclusions are drawn about the likely success of these alternative investment strategies in reducing investment risk.

Recent Canadian Human Rights Decisions Having An Impact On Gender-Based Risk Classification Systems, Robert L. Brown

Journal of Actuarial Practice (1993–2006)

With the passage of the Canadian Charter of Rights and Freedoms on April 17, 1982, all previous court precedents using gender in risk classification systems became obsolete. Three cases involving issues of discrimination in the use of age and gender now clarify the position of the Canadian judiciary. Based on the decisions in these three cases, this paper presents arguments that can be used in any jurisdiction to defend successfully the use of gender in a property /casualty risk classification system.

Discussion Of Robert L. Brown's "Recent Canadian Human Rights Decisions Having An Impact On Gender-Based Risk Classification Systems", Patrick Butler

Journal of Actuarial Practice (1993–2006)

This commentary examines the political and economic influence of demographic groups on rationales for granting exemption from laws prohibiting classification by age or sex, as evidenced in the cases discussed by Robert L. Brown. Age is less subject than sex to manipulation for group advantage. In Professor Brown's discussion of auto insurance cases, only the influence of group dominance can explain:

• Selective focus on young drivers;

• Indifference to ongoing overcharging of adult women signaled by undisputed 2:1 ratios of cost-related averages; and

• Avoidance of effective ways to evaluate miles of exposure to risk.

Contrary to Professor Brown's …

Obtaining A Life Table For Spinal Cord Injury Patients Using Information Theory, Patrick L. Brockett, Yun Song

Journal of Actuarial Practice (1993–2006)

We present a mortality table adjustment method based on a constrained information theoretic methodology. The objective is to adjust a standard mortality table to reflect a particular known characteristic of the population while remaining as close as possible to a given standard table. To illustrate these techniques, the medical results concerning survival of spinal cord injury patients are incorporated into a standard table to obtain a mortality table pertinent for paraplegic and quadriplegic individuals. The desired adjusted mortality table can be used by actuaries for special purposes such as wrongful injury damage award compensation calculations and determining life insurance premium …

Expected Loss Development In Workers' Compensation Pricing: A Shift In Credibility, Christopher J. Poteet

Journal of Actuarial Practice (1993–2006)

This paper shows that expected loss development is equivalent to adjusting the full credibility standard and applying credibility by policy period. Expected loss development should not be used in workers' compensation ratemaking. The credibility is correct before being adjusted.

Journal Of Actuarial Practice, Volume 3, No.1, 1995, Colin Ramsay , Editor

Journal of Actuarial Practice (1993–2006)

ARTICLES

Life Insurer Risk-Based Capital: An Option Pricing Approach • Samuel H. Cox and Arthur M.s. Hogan

Surveillance of Life Insurer Solvency: A Comparison of Stock and The Multiple Scenario Cash Flow Financial Stress Tests • Ronald W. Spahr and Paul L. Gronewolier

HIV, AIDS, Markov Processes, and Health and Disability Insurance • Steven Haberman

Obtaining a Life Table for Spinal Cord Injury Patients Using Information Theory • Patrick L. Brockett and Yun Song

Simulation of Investment Returns for a Money Purchase Fund • M. Zaki Khorasanee

Decision Making Under Conflicting Criteria In Pension Valuations: An Expected Utility Model • …

A Descriptive Analysis Of U.S. Housing Demand For The 1990s, Mark Eppli, Monty J. Childs

Finance Faculty Research and Publications

We analyze the effect of changes in type of household formation (i.e., single person, single parent, married couple, etc.) on the demand for housing and segment income by household type to determine housing tenure. Using data disaggregated by household type, we forecast housing demand for the United States through the turn ofthe century. The results indicate that total housing demand for the decade will be 11.8 million units, of which 8.1 million will be owner-occupied and 3.7 million will be renter-occupied.

Quantifying Time Value Errors, George A. Mangiero, Susan M. Mangiero

WCBT Faculty Publications

Focuses on the quantification of the magnitude of error when the mathematical function for present value is ignored and interpolation is used to determine the discount factor in the time valuation of cash flows. Length of discounting period; Linear interpolation between table present value factors for periodic interest rate and same interest rate plus one per cent; Sensitivity of maximum error timing to interest rate.

Models Of Inflation & The Costs Of Disinflation, Ahmed Gad Kamaly

Archived Theses and Dissertations

No abstract provided.

Default Risk And The Effective Duration Of Bonds, David F. Babbel, Craig B. Merrill, William Panning

Faculty Publications

Basis risk is the risk attributable to uncertain movements in the spread between yields associated with a particular financial instrument or class of instruments, and a reference interest rate over time. There are seven types of basis risk: Yields on

• Long-term versus short-term financial instruments.
• Domestic currency versus foreign currencies.
• Liquid versus illiquid investments.
• Bonds with higher or lower sensitivity to changes in interest rate volatility.
• Taxable versus tax-free instruments.
• Spot versus futures contracts.
• Default-free versus non-default-free securities.

Basis risk makes it difficult for the fixed-income portfolio manager to measure the portfolio's exposure to interest rate risk, heightens the anxiety …

Health Insurance Availability And The Retirement Decision, Jonathan Gruber, Brigitte C. Madrian

Faculty Publications

Because individuals aged 55-64 face large and uncertain medical expenditures without the guarantee of public insurance coverage provided by Medicare, the availability of post-retirement health insurance could be an important detenninant in the retirement decisions of this group. We investigate the effect of health insurance on retirement by focusing on state and federal "continuation of coverage" mandates which grant the retiree the right to continue purchasing health insurance through a previous employer for a specified number of months after leaving the firm. We exploit variation in the timing and generosity of these laws to identify the effect of the availability …

Issues On Macro-Economic Management In Nigeria., Gianni Zanini

Bullion

This paper examines the main source of inflationary pressures, and established the source of destabilization of the exchange and interest rates as the Budget deficit which has been increasing at an unsustainable pace since 1990. It also ascertain that stabilizing the economy will require a significant and sustained budget surplus with no additional domestic bank borrowing. It states that economy stabilization will also require a liberalization of foreign exchange and credit markets.

The New Auditor's Report: Have The Benefits Of Wording Changes Been Acknowledged Outside The Cpa Profession?, Marshall A. Geiger

Accounting Faculty Publications

CPAs use the auditor's report to communicate their opinions of an entity's financial statements and related disclosures. Concerned parties, in turn, use the report to assess the integrity of the financial statements and the accuracy of the disclosures.

In 1988, the American Institute of CPAs auditing standards board established new wording for the standard unqualified audit report. It also revised the reporting requirements and types of audit reports allowed (for example, the subject-to report for uncertainties and except-for report for consistency departures were eliminated). The new wording appears in Statement on Auditing Standards no. 58, Reports on Audited Financial Statements …

No. 124 1994 November

International Journal for Business Education

SIEC Historical Documents

Cost Management Competencies For Department Of Defense Program Managers, Brent R. Baxter, Kurt R. Bolin

Theses and Dissertations

The magnitude of money involved in the acquisition of defense systems and the public scrutiny resulting from cost overruns and program failures make cost management competence critical to program success. This research examined the cost management competencies required of defense program managers. A cost management competency model was developed from a foundation of past research. The model was evaluated through a mail survey of 682 intermediate and senior level military program managers in Air Force Materiel Command. The results provided by the 330 respondents indicate that 29 of the 47 competencies in the model were valuable to the program managers. …

Applicability Of An Activity Based Cost System In Government Service Organizations, Robert W. Callahan, Daniel A. Marion

Theses and Dissertations

This research focused on the applicability of Activity-Based Cost (ABC) systems within government service organizations. ABC implementation efforts within other government organizations were first examined to determine what information short caused managers to consider ABC implementation. Next, archival analysis was conducted within the case study organization to determine if the same accounting information shortfalls existed. An ABC system was then implemented within the case study organization. ABC information was compared with information provided by the case study organization's fund accounting system. The case study organization's fund accounting system traced congressional appropriations to categories of expenditures for FY93. The fund accounting …

1994-1995 Operating Budget: Southern University And A & M College, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The 1994-1995 Operating Budget of the Southern University and A & M College Campus.

1994-1995 Operating Budget, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The Southern University System Board and System Administration Operating Budget 1994-1995.

1994-1995 Operating Budget, Southern University System. Office Of Finance & Administration.

All Southern University System Budgets

The 1994-1995 Operating Budget of the Southern University Law Center.

Taxes And Dividend Policies: An International Study, Chinwe Edna Nweke

Theses and Dissertations in Business Administration

The tax effects hypothesis states that dividends have a negative impact on the value of a firm due to the preferential treatment given to capital gains over dividend income in some countries. This study tests the tax effects hypothesis in five countries: Australia, France, Germany, Japan and United States. The countries are selected because each had a significant tax law change within the period of study (1983-1991) and therefore provides an excellent opportunity for validation of this hypothesis.

The tax effects hypothesis is tested by first examining the effects of tax law changes on dividend payout ratios and then by …

Analyzing Growth Of Egyptian Industry With Endogenous Technological Change, Nihal Magdy El Megharbel

Archived Theses and Dissertations

No abstract provided.