Insurers issuing participating policies sometimes incur dividends which have been earned but which have not been disbursed or otherwise credited as of the financial statement date. Such dividends represent a due and unpaid liability amount. Reasons why dividends may be due and unpaid include all of the following EXCEPT:
A. Premium payment transactions not recorded within the last processing cycle for the reporting period.
B. All premiums paid to the anniversary date
C. The policy anniversary date is near the end of the calendar year and the policyholder has elected to receive dividends in cash, but the cash dividend has not yet been disbursed
D. The policy anniversary date is near the end of the calendar year and the policyholder has elected to have the dividend reduce the premiums, but the premium for the next policy year has not yet been received
Uncollected premiums
A. Are also an asset in statutory accounting
B. Are usually those past the due date but in the grace period
C. Accounting is similar to that for deferred premiums in that only the net premiums are necessary to match the reserve liability
D. Only A and B
Cash does include funds in transit, unless the deposit was prepared and sent to the bank. If the deposit was sent to the bank, it is considered cash and entered into the company's books and is no longer in transit. Funds in transit not yet sent to the bank are entered:
A. On a write-in line on the Assets page
B. As a prepaid asset on the Assets page
C. As a long term asset on the Assets page
D. As a non-admitted asset on Asset page
In the NAIC Accounting Practices and Procedures Manual there is limitation on the amount of EDP equipment and operating systems software, that can be shown as admitted assets. Companies are generally limited to of the reporting entity's capital and surplus, as reported in the financial statement most recently filed with the domiciliary commissioner adjusted to exclude any EDP and operating system software, net deferred tax assets and positive goodwill.
A. Four percent
B. Three percent
C. Five percent
D. Seven percent
On both old and new business, companies can also avoid premium notes by entering into agreements involving deposits of a portion of the premium with an extension on the balance. These deposits are treated as:
A. A liability
B. Unearned revenue and not credited to income until the deposit is used to pay the premium
C. A liability and not credited to income until the deposit is used to pay the premium
D. Asset and not credited to income until the deposit is used to pay the premium
Loans on policies are valuable to the policyholders, and insurers encourage them to protect this feature by saving it for emergency use. There are two basic types of loans. In case of conventional premium loans:
A. The insured makes a request for a loan. Since an emergency may very well have triggered this request, most companies will accept any form of notice such as a telephone call
B. The maximum loan amount is frequently limited to the cash value of the policy plus the value of paid-up additions
C. an insured has indicated in the insurance application that the policy is not to lapse for nonpayment of premiums so long as there is loan value adequate to cover unpaid premiums
D. Loan can be created to pay policy loan interest if the policyholder-borrower does not pay it in cash
Policy loan:
A. On policies are valuable to the policyholders, and insurers encourage them to protect this feature by saving it for emergency use
B. Interest rate is raised to eight percent
C. Interest rate was raised to eight percent, and later variable rates were approved
D. Do not have variable principal payments or a maturity
A Company's investments are admitted assets properly valued which support the reserves and liabilities, including required capital and surplus. Many jurisdictions permit companies to make some investments that do not meet all of the strict regulatory requirements. These additional investments are often referred to as basket assets. Which of the following is/are true for Basket assets?
A. They have been made out of a company's free surplus
B. Mortgage loans are first liens on the property backing them. Second or third-lien mortgages typically qualify as "basket" loans
C. A particular entity can obtain this benefit
D. They record investment and number of mortgages on which interest has been reduced, and the percent the interest was reduced
Admitted assets are those specifically prescribed by the NAIC Accounting Practices and Procedures Manual or prescribed or permitted by the various jurisdictions. An admitted asset is defined as having probable future economic benefits. It also has three essential characteristics. Which one of the following is out of those characteristics?
A. It embodies a probable future benefit which contributes to cash flow
B. A particular entity can obtain this benefit
C. The transaction giving rise to entity's right to control the benefit has already occurred
D. All of these
Financial Statements provide additional valuable information on the loans. Some of the more significant information provided includes EXCEPT:
A. The valuation of the mortgage loan portfolio, including a description of the valuation basis for mortgage loans and income recognition
B. The recorded investment and interest past due on mortgages with interest more than 90 days past due
C. The recorded investment and number of mortgages on which interest has been reduced, and the percent the interest was reduced
D. Disclosures of impaired loans: The total recorded investment in impaired loans at the end of each period
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