Excel Exhibit (App C Sh 1)
For the FCF timing, why is 2024 broken down by quarter vs the rest are by year?
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For the FCF timing, why is 2024 broken down by quarter vs the rest are by year?
Comments
Premiums are paid quarterly when the policy is active. After that, only losses are remaining which are assumed to be paid once a year
Thanks! Is this just an assumption or it's a rule? What about the premium receivable of $100 (no need to split)?
It's usually an assumption which should be stated. When we talk about premiums in the context of the FCF, it always refers to premiums received/ receivable and not earned premium. Usually they are paid over the quarter, but in this example it is all paid off in Q1 which makes sense since there are only $100 dollars left. It is the maintenance cost that is assumed to be paid quarterly. I think this example wasn't clear on the assumptions to make with respect to timing of non-claim payments. I expect it to be much clearer in the actual exam
Can you clarify the formula for LRC for PAA? PAA LRC = unearned premium - DAC. Isn't unearned insurance revenue = unearned premium or is that wrong? The example is taking: premium received - unearned insurance revenue to be = unearned premium.
insurance revenue = earned premium. It is the same thing
yes so wouldn't premium received - unearned insurance revenue = earned premium? My understanding of the example is that it is taking it as premium received - unearned insurance revenue = unearned premium
Your former point is correct. Where are you seeing the latter? On "App C Sch 2 - LRC non onerous", Premium received - earned insurance revenue = Unearned premium (PAA estimate since DAC is 0)
Hi, so sample question 17 in the IFRS problem has:
* PAA LRC (excl LC) = premiums received - Insurance revenue - DAC.
I believe given insurance revenue = earned premium typically, we are calculating the "unearned" from taking premiums received - insurance revenue which aligns with the formula for PAA being UEP - IACF. What I don't understand is why we aren't using direct unearned premium for the PAA LRC -> Premium Received + Premium Receivable - Insurance Revenue? Isn't this also unearned?
That's cause IFRS17 doesn't use gross written premiums to calculate the premium liabilities/LRC, but only premiums that you have on hand, which doesn't include premiums receivable. Technically, there's no coverage yet until you receive payment of premiums