GPCU 540 EXAM AND PRACTICE EXAM NEWEST

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GPCU 540 EXAM AND PRACTICE EXAM NEWEST

ACTUAL EXAM 270 QUESTIONS AND CORREC

DETAILED ANSWERS (VERIFIED ANSWERS

|ALREADY GRADED A+

International Financial Reporting Standards (IFRS) report the value of property, plant, and equipment assets at - ANSWER- Fair value.

Which one of the following is a characteristic of the balance sheet of the National Association of Insurance Commissioners (NAIC) Annual Statement? - ANSWER- It classifies surplus

into three major parts: contributed surplus, unassigned surplus,

and treasury stock.

When reviewing the statement of cash flows for Shelton Insurance, Jack was particularly interested in one section. Which one of the following describes a section of the statement of cash flows? - ANSWER- Cash flows from investing activities

Financial statements - ANSWER- Can be used by agents and brokers to assess coverage needs.

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A staff member of Gibsoncrest Insurance Company collected data to be used to analyze the homeowners portfolio results for the first six months of the current year. The loss count is at 53 percent of the year's planned goal. The average loss has steadily increased each month, and is now 10 percent above the average loss goal. Which one of the following statements correctly identifies a conclusion that the staff member should make, given this information? - ANSWER- A loss severity problem exists.

One of the primary reasons that growth places a strain on an insurer's policyholders' surplus is that - ANSWER- Statutory accounting requires the immediate recognition of all policy acquisition expenses.

When evaluating two investment alternatives, an investor must consider the stated annual interest rate as well as the number of compounding periods per year because - ANSWER- As the number of compounding periods per year increases, the effective annual interest rate increases over and above the stated annual interest rate.

Frank can deposit $1,000 in Diamond Bank and earn two percent simple interest for the first year. If Frank keeps the initial investment plus interest in the account for an additional 12 months, the account will earn 6 percent simple interest for 2 / 4

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this second year. At the end of the second year, rounded to the nearest dollar, the account value will be - ANSWER- $1,081

Which one of the following is used by A.M. Best to determine an insurer's financial size category (FSC)? - ANSWER- Adjusted surplus

The Gross Premiums to Policyholders' Surplus ratio measures - ANSWER- An insurer's ability to absorb losses before the effects of reinsurance cessions are considered.

If insurer loss reserves are too low, - ANSWER- Policyholders' surplus will be overstated.

The focus of finance activities is on - ANSWER- Obtaining and managing an organization's capital.

Three specific ratios are used to measure an insurer's

underwriting performance: the loss ratio, the expense ratio, and

the - ANSWER- Combined ratio.

An analyst for ABC Manufacturing Company has been asked by the management team to perform a study of its financial health relative to that of its competitors. ABC's industry segment has a 3 / 4

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trade organization that publishes average industry ratios for various financial measures. A review of these published ratios as compared to ABC's ratios will allow the analyst to determine - ANSWER- The areas of the company's operation that may need further review.

Which one of the following is correct with regard to an insurer's line and large-line capacity? - ANSWER- An insurer's line is influenced by the maximum amount of insurance or limit of liability allowed by insurance regulations.

ABC Insurance Company's written premiums are $2,000,000 and its earned premiums are $1,800,000. Losses total $1,000,000, and loss adjustment expenses are $350,000. Which one of the following represents ABC's loss ratio? - ANSWER- 75%

The focus of a line underwriter is - ANSWER- Evaluating new submissions and renewal underwriting.

With respect to underwriting, it is an unfair trade practice to - ANSWER- Unfairly discriminate when selecting loss exposures.

In the claim function, supporting the insurer's profit goal is accomplished through - ANSWER- Controlling expenses.

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