UEPR and U&IE part 1a

Jaarndt

Hello, I am very confused on if we should be including earned but unbilled and Reserve for Experience Based Rate Credits and Retro Adjustments. The flash cards you referenced say that we should include them;however, the fictitious example in the source adds then and then immediately subtracts them. The company I work at does not fully subtract these amounts off. Lastly there was an old exam problem I did a few weeks ago (I can't remember which one) that had you calculated UEPR and they said it was wrong to include these amounts. Do you know what is actually the proper way to calculate UEPR from this exhibit?

Staff - AC

Where do you find UEPR calculation in the Odomirok.18-IEE wiki please? So that I can compare to the fictitious example in the source.

Jaarndt

Hello, after doing some digging it was question 14 from spring 2014. The examiners report says a mistake was including the earned but unbilled amounts or reserve for rate credits and retrospective adjustments based on experience. I guess I am confused on the purpose of adding these and then subtracting like in the fictitious example. At my work the full amount is not subtracted and so some of the earned but unbilled and rate credit amounts would show up in our UEPR. I was not able to find in the source where this is discussed. Seems like they were trying to get people to make this mistake as just taking a high level view of part 1A it looks like these amounts should be included in UEPR since this exhibit is where UEPR is calculated. I guess my overall question is why add them If we subtract them anyway?

Staff - AC

Could you tell me the table number for the fictitious example where Odomirok makes this calculation?

Jaarndt

It's in the appendix 1. Page 7 of the fictitious annual statement.

Staff - AC

I don't see a UEP calculation there. Could you give me the page number?

Jaarndt

It's page 1319 of the online source document. The unearned premium is calculated in the last column.

Staff - AC

My source has only 502 pages.

https://casact.org/sites/default/files/2021-03/6U_CAS_Financial_Reporting.pdf

Staff - AC

In UIE Part 1a (my page 436), EBUB and rate credit are added, and UEP is left at that. Where do you see them "getting subtracted immediately afterwards?"

Jaarndt

Columns 3 and 4 add them but the values are negative. Then in rows 36 and 37 they basically undo this with the exact same amounts. Then the value in row 38 is what is used in the UEPR for the balance sheet.

Staff - AC

I see that UEP gross of EBUB and rate credit (row 38) is used for Balance Sheet UEP liability item, and UEP net of EBUB and rate credit (row 35) is used for IEE surplus allocation calculations.