Finance and Financial Management Commons^™

What We Say In The Naic Annual Statement Blank Actuarial Opinion, Kenneth W. Faig Jr.

Journal of Actuarial Practice (1993–2006)

The new language adopted for the actuarial opinion in the National Association of Insurance Commissioners' model actuarial opinion and memorandum regulation has been weakened at the same time the responsibilities of the opining actuary have been increased. The restoration of stronger language to the actuarial opinion would enhance the professional image of the actuary. If the legal environment for professional liability inhibits such a change, the opinion should be changed to describe more precisely the work performed and the conclusion reached by the actuary.

Concentration In American Property-Casualty Companies, Edward Nissan

Journal of Actuarial Practice (1993–2006)

A Theil's entropy index utilizing premiums written as units is employed to measure trends in concentration of the largest 200 property-casualty companies in the United States between 1985 and 1993 based on Best's Insurance Report data. Each of the indexes confirms that concentration trends experienced no increase for the whole period for all 200 firms, the top 20, and subsets of lower ranked companies. Significant differences are observed, however, between groups of companies for the same period.

Disclosure And Confidentiality Requirements Of Corporate Pension Plan Actuaries, Theodore Konshak

Journal of Actuarial Practice (1993–2006)

Corporate pension plan actuaries are subject to the standards of the Joint Board for the Enrollment of Actuaries. The Joint Board is empowered to establish such standards under the provisions of the Employee Retirement Income Security Act of 1974, a federal law. In consideration of these statutory standards, this article will discuss whether standards published by professional actuarial organizations have any applicability. The contrast between the disclosure requirements of federal law and the confidentiality standards of the Society of Actuaries will be highlighted.

Methodologies For Determining Reserve Liabilities In The Workers Compensation High Deductible Program, Jerome J. Siewert

Journal of Actuarial Practice (1993–2006)

In this paper I describe several approaches for estimating liabilities under a high deductible program, including a proposal for a more sophisticated approach relying upon a loss distribution model. The discussion addresses several related issues dealing with deductible size and mix, absence of longterm histories, and the determination of consistent loss development factors among deductible limits. In addition, I propose several approaches for estimating aggregate loss limit charges, if any, and the asset value for associated servicing revenue.

Discussion Of Theodore Konshak's "Disclosure And Confidentiality Requirements Of Corporate Pension Plan Actuaries", Richard Daskais, Brian A. Jones

Journal of Actuarial Practice (1993–2006)

No abstract provided.

Annuity Choices For Pensioners, Zaki M. Khorasanee

Journal of Actuarial Practice (1993–2006)

We consider two ways for a retiree to obtain a pension from a retirement fund: through the purchase of a whole life annuity providing a level monetary income; and through the withdrawal of income from a fund invested in equities. Deterministic and stochastic models are used to assess the risks and benefits associated with each approach. In each case the projected cash flows are compared with those from a whole life annuity providing an income linked to price inflation. We conclude that, although each of the two options conSidered involves significant risks, each method may be attractive to certain groups …

A Possibilistic Linear Programming Method For Asset Allocation, Lijia Guo, Zhen Huang

Journal of Actuarial Practice (1993–2006)

The mean-variance method has been one of the popular methods used by most financial institutions in making the decision of asset allocation since the 1950s. This paper presents an alternative method for asset allocation. Instead of minimizing risk for a given expected return or maximizing expected return for a fixed level of risk, our approach considers simultaneously maximizing the rate of return of portfolio, minimizing the risk of obtaining lower return, and maximizing the possibility of reaching higher return. By using a triangular possibilistic distribution to describe the uncertainty of the return, we introduce a possibilistic linear programming model which …

An Approach To Estimating Market Value And Duration Of Interest-Sensitive Whole Life Contracts, Thomas J. Merfeld

Journal of Actuarial Practice (1993–2006)

A fixed premium interest·sensitive whole life contract is analyzed in order to estimate its market value. In addition, using various definitions of duration, we determine the duration of the contract for each definition. The results of this analysis have implications for market value accounting of life insurance liabilities and for life company portfolio management.

Participating Gics: Performance Attribution Analysis, Alec Stais, John P. Toohey Iii

Journal of Actuarial Practice (1993–2006)

The increasing popularity of participating GICs has created a need for an objective understanding of their performance. The fixed income attribution techniques are not adequate for measuring participating GIC performance because they typically restrict performance measurement to concepts such as duration management, sector rotation, and issue selection. We develop an attribution technique based on four components or effects that are helpful in explaining the changes in credited rates. They are the constant duration effect, the reinvestment effect, the cash flow effect, and the investment effect. The underlying mathematical approach to calculating these effects is presented along with examples.

Bias Of Excluding High And Low Data For Long-Tailed Distributions, Cheng-Sheng Peter Wu

Journal of Actuarial Practice (1993–2006)

Property and casualty actuaries frequently employ a technique of averaging (called high-low averages) that excludes the same amount of data at both ends. For example, (0 in selecting loss development factors, the middle three of the latest five years or the middle eight of latest 12 quarters sometimes are used, or (ii) in calculating average expense ratios, the largest expense ratios and the smallest expense ratios may be removed from the sample. Although highlow averages can reduce the impact of influential data on analyzed results, the averages will result in downward bias when they are applied to pricing or reserving …

Third Party Administrator (Tpa) Service Pricing And Incentive Contracts, Hou-Wen Jeng

Journal of Actuarial Practice (1993–2006)

This paper addresses a few of the most important pricing issues faced by a third party administrator (TPA) whose main responsibility is claims handling for self·insured employers and self·insured groups. Such pricing issues include the development of service fees using claim closure information, the selection of service durations, and the design of incentive (either activity-based or financially-based) service contracts. Formulas for pricing new and open claims are provided.

Nonmedical Limits In Individual Life Insurance, James B. Ross, Shalini E. Perumpral

Journal of Actuarial Practice (1993–2006)

This paper shows data that illustrate the substantial variation among nonmedical schedules and the dramatic increase in their amount limits from 1972 through 1992. Coefficients of variation are analyzed for several data subsets. We find that the variation of schedules in the sample of all firms has increased throughout the 1972-1992 period for issue ages up to 30, but has declined for issue ages beyond 30 during the 1982-1992 period. For the non-New York and stock companies our statistical tests indicate an increase in the variability of schedules over the full period 1972 to 1992.

Nonmedical Limits In Individual Life Insurance, James B. Ross, Shalini E. Perumpral

Journal of Actuarial Practice (1993–2006)

This paper shows data that illustrate the substantial variation among nonmedical schedules and the dramatic increase in their amount limits from 1972 through 1992. Coefficients of variation are analyzed for several data subsets. We find that the variation of schedules in the sample of all firms has increased throughout the 1972-1992 period for issue ages up to 30, but has declined for issue ages beyond 30 during the 1982-1992 period. For the non-New York and stock companies our statistical tests indicate an increase in the variability of schedules over the full period 1972 to 1992.

Pension Funding By Normal Costs Or Amortization Of Unfunded Liabilities, Keith P. Sharp

Journal of Actuarial Practice (1993–2006)

We discuss the extent of the actuary's freedom in choosing the funding method for defined benefit pension plans. In particular, we look at funding through a combination of normal costs, amortization of an unfunded liabilities, and fund of assets. The IRS constraint on "reasonable funding methods" is considered, with particular mention of the aggregate entry age normal method. In addition, an algebraic development is performed of year-to-year changes in the status of a plan's funding.

A Proposal For Improving The System Of Financing Health Care In Singapore, Robert Keng Heong Lian, Loi Soh Loi

Journal of Actuarial Practice (1993–2006)

Like many other countries, including the United States, Singapore faces the dual problems of rising health care costs and an aging population. To cope with these problems, the Singapore government introduced the Medishield scheme in 1989 that provides low cost catastrophic medical insurance coverage. The scheme suffers from a serious deficiency, however: coverage ceases at age 70. This deficiency is exacerbated by Medishield's premium payment structure which is akin to the premium structure of a one year renewable term policy so no reserves are developed. As a result, coverage beyond age 70 requires exorbitant premiums that are beyond the reach …

Journal Of Actuarial Practice, Volume 4, No.1, 1996, Colin Ramsay , Editor

Journal of Actuarial Practice (1993–2006)

ARTICLES

An Approach to Estimating Market Value and Duration of Interest-Sensitive Whole Life Contracts • Thomas J. Merfeld

Participating GICs: Performance Attribution Analysis • Alec Stais and John P. Toohey III

Asset Allocation in Investing to Meet Liabilities • Anthony Dardis and Vinh Loi Huynh

A Possibilistic Linear Programming Method for Asset Allocation • Lijia Guo and Zhen Huang

Nonmedical Limits in Individual Life Insurance • James B. Ross and Shalini Perumpral

A Proposed New System of Financing Health Care in Singapore • Robert Keng Heong Lian and Loi Soh Loi

Concentration in American Property-Casualty Companies • Edward Nissan

Bias …

Municipal Securities Market: Same Problems -- No Solutions, Ann Judith Gellis

Articles by Maurer Faculty

This article examines the existing regulations of the municipal securities market, focusing on what activities prompted the regulatory changes and analyzing the direction and efficacy of these regulations in terms of the deficiencies in the market. Part One gives a background sketch of the market and its participants from the time of the New York City fiscal crises to today. Part Two discusses whether the existing regulation is sufficient to produce disclosure, focusing on the Orange County crises. Part Three offers a critique of the current regulatory scheme and makes some suggestions for reform.

Accounting For Derivatives, Craig Ward '96

Honors Projects

This paper will address the issue of disclosure concerning the derivative acitivities of publicly traded companies. The paper will begin by explaining the basics of derivatives and proceed to explain the current requirements in place to date. It will also detail the current developments of proposed new regulations for derivative activities. Then, the paper will present the results of how a sample of publicly traded companies currently account for and report their derivative positions in the financial statements. Finally, I will propose new requirements to account for and report derivatives in the financial statements. These requirements will combine ideas already …

Journal Of Actuarial Practice, Volume 4, No. 2, 1996, Colin Ramsay , Editor

Journal of Actuarial Practice (1993–2006)

ARTICLES

Methodologies for Determining Reserve Liabilities in the Workers Compensation High Deductible Program • Jerome J. Siewert

Third Party Administrator (TPA) Service Pricing and Incentive Contracts • Hou-Wen Jeng

Annuity Choices for Pensioners • M. Zaki Khoransee

Pension Funding by Normal Costs or Amortization of Unfunded Liabilities • Keith P. Sharp

What We Say in the NAIC Annual Statement Blank Actuarial Opinion • Kenneth W. Faig, Jr.

Constrained Forecasting of the Number of IBNR Claims • Louis G. Doray

Editor - Colin Ramsay, University of Nebraska. Associate Editors: Robert Brown, University of Waterloo ○ Cecil Bykerk, Mutual of …

On The Information Content Of Calls Of Convertible Securities, Anthony K. Byrd, William T. Moore

Faculty Publications

Negative stock price reactions to conversion-forcing calls of convertible bonds and preferred stocks are reexamined, and most of the sample firms are shown to exhibit full price recovery by the end of the conversion period. In addition, analysts' earnings forecasts, both short-term and long-term, are found to be revised upward following call announcements for convertible bonds and preferred stocks. The combined findings cast doubt on the established belief that such capital structure decisions signal negative information about firm value.

Perceptions Of Financial Counselling In Western Australia, Natalie Dall

Theses: Doctorates and Masters

The development of financial counselling in Australia during the past decade has been complex and fragmented. Financial counselling and rural counselling services within Western Australia are funded from a range of government, non-government and church based groups. This has contributed to problems in the identification of basic definitions of the need for services, the role of the financial counsellor and service models or functions. The failure to define the role of the financial counsellor and the needs to be addressed by financial counselling services, "appears to be the most important historic weakness in the field." (Wyse et al., 1990, p.2). …

How Critical Is A Good Location To A Regional Shopping Center?, Mark Eppli, James D. Shilling

Finance Faculty Research and Publications

The goal of this paper is to empirically measure the consumer utility trade-off between store location (i.e., distance to a shopping center) and retail agglomeration in regional shopping centers. Using the Lakshmanan and Hansen retail expenditure model, our findings reveal that the distance specification is of surprisingly little importance in explaining retail sales. Conversely, agglomeration economies were of significant importance in explaining consumer patronage at regional shopping centers. The implication of these results is that smaller regional shopping centers may be dominated by large super-regional shopping centers with the smaller one or two anchor regional shopping centers unable to compete …

A Simulation Approach To The Choice Between Fixed And Adjustable Rate Mortgages, William K. Templeton, Robert S. Main, J. B. Orris

Scholarship and Professional Work - Business

Presents a study which offers simulation approach model by which borrowers may more effectively evaluate fixed rate mortgage (FRM) and adjustable rate mortgage (ARM) choice. Identification of pricing variables as an important determinant of choice; Construction of model parameters comparing present value costs of ARM and FRM; Presentation of simulation outputs.

A Comparative Study Of Job Satisfaction In Two Egyptian Hotels, Amany Ibrahim Shahin

Archived Theses and Dissertations

No abstract provided.

Spreadsheets And Or/Ms Models: An End-User Perspective, Linda Leon, Zbigniew Przasnyski, Kala Seal

Finance Faculty Works

In 1986, Bodily stated that practitioners could use spreadsheets to model management science/operations research (OR/MS) problems. We surveyed OR practitioners to determine the extent of implementation of these OR/MS problems in a spreadsheet environment and found that end users are solving OR/MS problems using spreadsheets across many functional areas of business, though in varying degrees. Some areas show higher use than others and spreadsheet models are being used to implement various OR tools in a pattern very similar to their use in the nonspreadsheet environment.

Encouraging Relational Investment And Controlling Portfolio Investment In Developing Countries In The Aftermath Of The Mexican Financial Crisis, Randall S. Thomas, Enrique Carrasco

Vanderbilt Law School Faculty Publications

Global financial markets trade about $1 trillion of securities each day. Investors in these markets seek the highest returns by shiffing huge amounts of capital from nation to nation, "playing global monopoly... and deciding which governments deserve to 'Pass Go' and collect $200 billion dollars and which should go directly to jail and be starved of the capital to raise living standards." International competition for capital gives global investors tremendous leverage over developing nations' economic policies.

Investors will shift capital into developing countries that adopt macroeconomic policies to ensure stable, high rates of effective return. However, if returns drop, or …

Fund-Raising Systems In Children's Museums: An Analysis Of Fund-Raising Behavior And Philanthropic Income Trends, Elizabeth A. Potter

Walden Dissertations and Doctoral Studies

The problem under investigation. This dissertation analyzed philanthropic donations and fund-raising behavior in children's museums. The research embodies a descriptive, inductive, and deductive study which infers that philanthropic donations increase gradually and are influenced by an organization's fund-raising behavior.

The subjects. A stratified random sample of 15 small, 47 medium, and 20 large U.S. children's museums were surveyed; operating budgets determined museum size.

The methodology. Time-series statistical techniques and economic data measures calculated the change in children's museum philanthropic donations from 1990-1994. Correlation coefficients determined the relationships between the income variables. The fund-raising behavior variables, nominal data, were calculated in …

Health Insurance And Early Retirement: Evidence From The Availability Of Continuation Coverage, Jonathan Gruber, Brigitte C. Madrian

Faculty Publications

The dramatic postwar decline in the labor force participation of older men in the United States has motivated a sizable body of literature on retirement behavior. Three factors, in particular, have been studied extensively: the growth of the Social Security program (see, for example, Burtless 1986; Burtless and Moffitt 1984; Diamond and Hausman 1984; Hausman and Wise 1985; Sueyoshi 1989), the increased availability and generosity of private pensions (Stock and Wise 1990a, 1990b), and the expansion of federal disability insurance (Bound and Waidmann 1992). One potentially important factor that until recently has not received much attention is the availability of …

A Note On Internet Resources For The Entrepreneur: A Small Firm Finance Perspective, James C. Brau

Faculty Publications

This article concentrates on internet resources that are available to those interested in entrepreneurial and small firm finance. Specifically, I present web pages that focus on general entrepreneurial issues and different avenues for acquiring capital. The three main areas of external financing that I include are venture capital, going public, and loans. Additionally, the advantages of using electronic mail, distribution lists, and personal web page applications are discussed and several examples presented.