CAS Exam 2025 With 100% Correct
Answers
Purpose of financial reporting - CORRECT ANSWER✔✔Communicate financial results to the
stakeholders
Financial reports help stakeholders & regulators: - CORRECT ANSWER✔✔1. Track the company's
financial performance
2. Compare the company's performance
3. Make informed financial decisions
Accounting principles prescribed by the State Regulators - CORRECT ANSWER✔✔Statutory
Accounting Principles (SAP)
Main reason that SAP rules are conservative - CORRECT ANSWER✔✔Main focus of the
regulators is to ensure that the policyholders will be protected
Primary users of Generally Accepted Accounting Principles (GAAP): - CORRECT
ANSWER✔✔Investors
Main objective of GAAP: - CORRECT ANSWER✔✔Present results that closely measure the
financial performance during a period (by matching revenues and expenses)
Certain accounting rules can impact many aspects of the actuary's work: - CORRECT
ANSWER✔✔1. Issuing a SAO
2. Pricing/Designing insurance products
3. Determining capital requirements
,4. Evaluating risk transfer of reinsurance contracts
5. Assessing the reserve adequacy of non-insurers
6. Assisting in the calculation of taxable income
7. Valuing insurers in M&A transactions
Describe the Balance Sheet - CORRECT ANSWER✔✔Shows the assets and liabilities as of a
certain point in time
Role of the actuary in the preparation of the balance sheet - CORRECT ANSWER✔✔Help value
the reserves - uncertainty associated with the reserves
Describe the Income Statement - CORRECT ANSWER✔✔Shows the financial results (income)
earned during a period
Actuary's major role in income statement - CORRECT ANSWER✔✔Estimate the amount and
timing of payments
Describe the Capital & Surplus exhibit - CORRECT ANSWER✔✔Lists those transactions that
impact surplus, but which are not included in the income statement
Describe the Cash Flow Statement - CORRECT ANSWER✔✔Shows the cash flows into and out of
the firm
Different net/gross basis for SAP & GAAP - CORRECT ANSWER✔✔SAP: net basis
GAAP: gross basis
Describe Notes to the Financial Statements - CORRECT ANSWER✔✔Quantitative & qualitative
disclosures elaborating on elements from the statements
,List a party that would take a "liquidation" view of insurer & one that would take a "going
concern" view: - CORRECT ANSWER✔✔Liquidation: Regulators
Going concern: Investors
Compare Fair Value to Historical Cost: - CORRECT ANSWER✔✔Fair value: value it can be traded
at in the open market
Historical cost: purchase price - depreciation
List an advantage of Fair Value & one for Historical Cost - CORRECT ANSWER✔✔Fair value: more
accurate (consistent with actual market value)
Historical cost: more reliable (objectively verifiable)
Compare principles to rules, including their respective advantages: - CORRECT
ANSWER✔✔Principle: a general accounting approach that the users need to interpret
Rule: specific guidance that users need to follow
The rules are easier to interpret, but the principles are more adaptable to changes
Why are nonadmitted assets not included in the surplus calculation - CORRECT ANSWER✔✔Non
admitted assets are not easily convertible to cash to satisfy the insurers liabilities
Bond face value - CORRECT ANSWER✔✔amount to be paid in the final single payment
Upon purchase of the bond, record: - CORRECT ANSWER✔✔the bond at actual cost
Upon purchase of the common stocks, record: - CORRECT ANSWER✔✔the bond at cost +
brokerage fees
, After purchase of the common stocks, record: - CORRECT ANSWER✔✔the bond at fair value
Preferred stocks are valued: - CORRECT ANSWER✔✔similar to bonds (i.e. NAIC 1-6)
List some differences between preferred stocks and common stocks: - CORRECT ANSWER✔✔1.
Preferred stocks do not offer voting rights
2. Preferred stocks guarantee dividends
3. Owners of preferred stocks have priority to those of common stocks to receive a return of
their investment during a liquidation
Valuation rules of different type of real estate: - CORRECT ANSWER✔✔1. Properties occupied by
the company (>50%): Depreciation - Encumbrances
2. Properties held for the production of income: Depreciated cost - Encumbrances
3. Properties held for sale: min (Depreciated cost, Fair value) - Encumbrances
Portion of agents balances that is nonadmitted - CORRECT ANSWER✔✔Premium that is over 90
days overdue is nonadmitted
Uncollected premiums & agents' balances - CORRECT ANSWER✔✔Balances due before the
financial statement date
Deferred premiums - CORRECT ANSWER✔✔Balances due after the financial statement date
Amounts recoverable from reinsurers includes: - CORRECT ANSWER✔✔Just the balances due
for the losses that have been paid (the ceding company recognizes recoverables on it unpaid
losses by holding the loss reserves net of recoveries)
Define deferred tax asset (DTA) - CORRECT ANSWER✔✔Future tax benefits that arise due to
temporary differences in income recognition between tax and statutory accounting
Answers
Purpose of financial reporting - CORRECT ANSWER✔✔Communicate financial results to the
stakeholders
Financial reports help stakeholders & regulators: - CORRECT ANSWER✔✔1. Track the company's
financial performance
2. Compare the company's performance
3. Make informed financial decisions
Accounting principles prescribed by the State Regulators - CORRECT ANSWER✔✔Statutory
Accounting Principles (SAP)
Main reason that SAP rules are conservative - CORRECT ANSWER✔✔Main focus of the
regulators is to ensure that the policyholders will be protected
Primary users of Generally Accepted Accounting Principles (GAAP): - CORRECT
ANSWER✔✔Investors
Main objective of GAAP: - CORRECT ANSWER✔✔Present results that closely measure the
financial performance during a period (by matching revenues and expenses)
Certain accounting rules can impact many aspects of the actuary's work: - CORRECT
ANSWER✔✔1. Issuing a SAO
2. Pricing/Designing insurance products
3. Determining capital requirements
,4. Evaluating risk transfer of reinsurance contracts
5. Assessing the reserve adequacy of non-insurers
6. Assisting in the calculation of taxable income
7. Valuing insurers in M&A transactions
Describe the Balance Sheet - CORRECT ANSWER✔✔Shows the assets and liabilities as of a
certain point in time
Role of the actuary in the preparation of the balance sheet - CORRECT ANSWER✔✔Help value
the reserves - uncertainty associated with the reserves
Describe the Income Statement - CORRECT ANSWER✔✔Shows the financial results (income)
earned during a period
Actuary's major role in income statement - CORRECT ANSWER✔✔Estimate the amount and
timing of payments
Describe the Capital & Surplus exhibit - CORRECT ANSWER✔✔Lists those transactions that
impact surplus, but which are not included in the income statement
Describe the Cash Flow Statement - CORRECT ANSWER✔✔Shows the cash flows into and out of
the firm
Different net/gross basis for SAP & GAAP - CORRECT ANSWER✔✔SAP: net basis
GAAP: gross basis
Describe Notes to the Financial Statements - CORRECT ANSWER✔✔Quantitative & qualitative
disclosures elaborating on elements from the statements
,List a party that would take a "liquidation" view of insurer & one that would take a "going
concern" view: - CORRECT ANSWER✔✔Liquidation: Regulators
Going concern: Investors
Compare Fair Value to Historical Cost: - CORRECT ANSWER✔✔Fair value: value it can be traded
at in the open market
Historical cost: purchase price - depreciation
List an advantage of Fair Value & one for Historical Cost - CORRECT ANSWER✔✔Fair value: more
accurate (consistent with actual market value)
Historical cost: more reliable (objectively verifiable)
Compare principles to rules, including their respective advantages: - CORRECT
ANSWER✔✔Principle: a general accounting approach that the users need to interpret
Rule: specific guidance that users need to follow
The rules are easier to interpret, but the principles are more adaptable to changes
Why are nonadmitted assets not included in the surplus calculation - CORRECT ANSWER✔✔Non
admitted assets are not easily convertible to cash to satisfy the insurers liabilities
Bond face value - CORRECT ANSWER✔✔amount to be paid in the final single payment
Upon purchase of the bond, record: - CORRECT ANSWER✔✔the bond at actual cost
Upon purchase of the common stocks, record: - CORRECT ANSWER✔✔the bond at cost +
brokerage fees
, After purchase of the common stocks, record: - CORRECT ANSWER✔✔the bond at fair value
Preferred stocks are valued: - CORRECT ANSWER✔✔similar to bonds (i.e. NAIC 1-6)
List some differences between preferred stocks and common stocks: - CORRECT ANSWER✔✔1.
Preferred stocks do not offer voting rights
2. Preferred stocks guarantee dividends
3. Owners of preferred stocks have priority to those of common stocks to receive a return of
their investment during a liquidation
Valuation rules of different type of real estate: - CORRECT ANSWER✔✔1. Properties occupied by
the company (>50%): Depreciation - Encumbrances
2. Properties held for the production of income: Depreciated cost - Encumbrances
3. Properties held for sale: min (Depreciated cost, Fair value) - Encumbrances
Portion of agents balances that is nonadmitted - CORRECT ANSWER✔✔Premium that is over 90
days overdue is nonadmitted
Uncollected premiums & agents' balances - CORRECT ANSWER✔✔Balances due before the
financial statement date
Deferred premiums - CORRECT ANSWER✔✔Balances due after the financial statement date
Amounts recoverable from reinsurers includes: - CORRECT ANSWER✔✔Just the balances due
for the losses that have been paid (the ceding company recognizes recoverables on it unpaid
losses by holding the loss reserves net of recoveries)
Define deferred tax asset (DTA) - CORRECT ANSWER✔✔Future tax benefits that arise due to
temporary differences in income recognition between tax and statutory accounting
