| SOA真题Course8E |
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COURSE 8: Fall 2005 - 1 - GO TO NEXT PAGE
Finance and Enterprise Risk Management; Core Segment
Morning Session
**BEGINNING OF EXAMINATION**
FINANCE AND ENTERPRISE RISK MANAGEMENT; CORE SEGMENT
MORNING SESSION
Questions 1-2 pertain to the Case Study.
Each question should be answered independently.
1. (13 points) Kelly Ratings recently completed their review of Zoolander and sent you the
results, which recommend a downgrade in the rating. Tomas Lyon has asked you to
provide a report about this situation.
You have gathered the following information as of December 31, 2004:
Term net amount at risk is $3,000 million.
Whole Life net amount at risk is $1,500 million.
The general account annuity business is 100% GICs.
Prepare a report that addresses the following points.
(a) (2 points) Describe the roles of rating agencies and how they serve the securities
markets and the public.
(b) (1 point) Describe how rating agencies develop and use liquidity ratios in
assessing a firm’s financial strength.
(c) (4 points) Calculate Zoolander’s capital adequacy ratio as of December 31, 2004,
based on Kelly’s rating methodology.
(d) (4 points) Describe aspects of Kelly’s ratings process and models that could be
considered inferior to those used by Standard %26amp; Poors, Moody’s and Fitch
Ratings.
(e) (2 points) List the requirements to become a nationally recognized statistical
ratings organization, as defined in the SEC’s proposed rule, and determine
whether Kelly meets those requirements.
COURSE 8: Fall 2005 - 2 - GO TO NEXT PAGE
Finance and Enterprise Risk Management; Core Segment
Morning Session
Questions 1 - 2 pertain to the Case Study.
Each question should be answered independently.
2. (10 points) Tomas Lyon, Zoolander’s CEO, has asked to speak with you about two
concerns: liquidity risk and credit risk.
(a) (2 points) Describe the forms of liquidity risk faced by insurance companies and
the importance of maintaining adequate liquidity.
(b) (1 point) Comment on Zoolander’s current liquidity position.
(c) (4 points) Lyon is concerned with a drop in the quality of the bond portfolio. He
asks you to build a model to quantify the potential exposure over the next year
due to credit risk. Lyon wants an expectation as well as a “worst case scenario”
based on a confidence interval of 99%.
You have recently become familiar with the CreditMetrics approach to modeling
credit risk. Outline a plan to develop a model for Zoolander, including the major
calculations and assumptions needed.
(d) (3 points) Lyon wants to consider securitization as a means of reducing credit and
liquidity risks and as a management tool.
Explain the advantages to Zoolander of securitizing:
i. Private Placement Bonds
ii. A Closed Block of Insurance Liabilities
COURSE 8: Fall 2005 - 3 - GO TO NEXT PAGE
Finance and Enterprise Risk Management; Core Segment
Morning Session
3. (12 points) Your company, New West Life, has been seeking expansion into the Asian
market. New West’s CEO has negotiated a joint venture opportunity with a Chinese
firm, Orient Life.
The joint venture will sell investment products to the expanding Chinese middle class.
Each of the two partners will have 50% ownership of the venture. New West will invest
$600 million, and Orient Life will invest $400 million. Neither partner will be able to
exit the venture during the first five years.
In addition, New West will have the option, at the end of five years, to buy Orient Life’s
share of the partnership, for $550 million.
You have assessed that the joint venture has a 50% probability of increasing in value to
$2,150 million at the end of five years and a 50% probability of decreasing in value to
$600 million at the end of five years. There are no interim cash flows expected in the
five year period.
You are given the following data:
New West Life weighted average cost of capital (WACC): k = 10%
New West Life fe Beta: β NW = 1.2
Joint Venture Beta: β JV = 0.8
Market Return: rm = 9%
Risk-free Rate: rf = 4%
The CEO of New West has asked you to review the joint venture opportunity.
(a) Determine the appropriate risk-adjusted discount rate to use to assess this
opportunity.
(b) Assess the opportunity using a net present value (NPV) approach.
(c) Re-evaluate the joint venture using a contingent claims analysis (CCA) approach.
(d) Explain to the CEO why the NPV and CCA results are different.
(e) Recommend to the CEO whether or not New West should pursue this
opportunity. Justify your response.
COURSE 8: Fall 2005 - 4 - GO TO NEXT PAGE
Finance and Enterprise Risk Management; Core Segment
Morning Session
4. (8 points) You are the Chief Actuary of Global Insurance, a public company selling only
Universal Life, with divisions located in the U.S., Canada and Australia. Your actuaries
have discovered pricing inadequacies on the in-force products. Global’s CFO is very
interested in the volatility of the company’s results due to both the foreign exchange
markets and the pricing issues.
(a) Describe the income-based reserve methodology that Global must follow in each
jurisdiction in which it is conducting business. Include in your description the
accounting implications of the pricing inadequacies and their impact on the
current year’s country-specific income statements.
(b) Outline a report for the CFO that includes the following:
i. The foreign exchange risks that Global has assumed.
ii. Reasons why Global might consider hedging those risks.
iii. Hedging strategies and instruments that may be used for currency
hedging.
COURSE 8: Fall 2005 - 5 - GO TO NEXT PAGE
Finance and Enterprise Risk Management; Core Segment
Morning Session
5. (5 points) You have been hired by Salmon Inc. to provide investment strategy advice for
Salmon’s Defined Benefit Plan.
Salmon’s management is concerned about the accuracy of the plan surplus calculation in
light of volatility of the surplus over the past two years.
You have been provided the following plan information:
Plan Assets $240 million
Plan Liabilities $250 million
The plan’s current investment strategy, valuation and reporting are:
%26#8226; Required rate of return on assets is 7%. Given this constraint, minimize asset
volatility.
%26#8226; Liability risk is determined using Monte Carlo testing.
%26#8226; Discount rate for liabilities tied to expected return on assets
%26#8226; The annual report to Management provides a best estimate, 20-year funding level
forecast, measured on a GAAP basis.
(a) Describe weaknesses in the current strategy, valuation and reporting.
Recommend improvements to better manage market-related risks of the pension
plan.
(b) Outline methods to control pension plan risks that are not market related.
COURSE 8: Fall 2005 - 6 - GO TO NEXT PAGE
Finance and Enterprise Risk Management; Core Segment
Morning Session
6. (8 points) Moby Life is considering selling an in-force block of term insurance. You are
the appointed actuary of the company and have been asked by the CEO to estimate the
fair value of the block as of December 31, 2005.
Future gross cash flows have been projected as follows:
2006 2007 2008
Premiums 500 490 486
Expenses %26amp; Commissions 75 74 73
Death Claims 64 66 66
Assume there are no further cash flows beyond 2008.
Moby Life reinsures 50% of the business under a coinsurance treaty and receives 10% of
ceded premium as a reinsurance allowance.
You have been provided with the following information:
Risk-free rate: 4%
Rate of return on assets: 8%
Cost of capital: 15%
Benchmark equity to liability ratio: 10%
Effective tax rate: 35%
(a) (2 points) Describe the difference between a fair value methodology and U.S.
GAAP for valuation of policy liabilities.
(b) (4 points) Use a cost-of-capital approach to determine the fair value of the policy
liabilities for the term block of business as of December 31, 2005. Assume all
cash flows occur at mid-year. Show your work.
(c) (2 points) The CEO would like to know how much this block of business is worth
if it is kept with Moby Life rather than being sold. Suggest an alternate measure
for valuing the business if it is retained by Moby Life. Describe the differences
between this measure and the fair value methodology in (b).
COURSE 8: Fall 2004 - 7 - STOP
Finance and Enterprise Risk Management; Core Segment
Morning Session
7. (4 points) Allegro Annuity is an insurance company domiciled in the U.S. that issues a
full range of fixed annuity products. Starting this year, Allegro is required to comply
with the cash flow testing C-3a risk-based capital requirement. The company has hired
you to help them understand the impact of this requirement.
(a) Compare the C-3a cash flow testing requirement with the factor-based C-3a
requirement.
(b) Allegro currently holds statutory reserves that are calculated using the CARVM
methodology and meet minimum regulatory standards.
Explain why Allegro may still be required to hold additional capital under the C-
3a cash flow testing requirements.
**END OF EXAMINATION**
MORNING SESSION
COURSE 8: Fall 2005 - 8 - GO ON TO NEXT PAGE
Enterprise Risk Management Segment
Afternoon Session
**BEGINNING OF EXAMINATION**
ENTERPRISE RISK MANAGEMENT SEGMENT
AFTERNOON SESSION
Beginning With Question 8
8. (8 points) Desperate Housefires (DH) is a property and casualty (P%26amp;C) insurance
company speciali[1] [2] [3] 下一页 |
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