3. (25 points) An insurance company has the following data as of December 31, 2018: Accident Year Reported Loss and ALAE ($000s) 2016 2,000 2017 1,750 2018 800 | Calendar Year Earned Premium ($000s) 2016 4,600 2017 5,100 2018 5,800 Development Selected Cumulative Age to Ultimate Development Factors 36 1.46 2.08 4.90 24 12 Date January 1, 2016 July 1, 2018 Rate Change -2% +3% We are also given that - Annual loss and ALAE trend = 4% - Annual premium trend = 3% - Fixed expense ratio = 6% - Variable expense ratio = 26% - Profit and contingencies provision = 5% - ULAE provision as a % of loss and ALAE = 8% - All policies are annual. - Exposures are written evenly throughout each calendar year. - New rates will be in effect for one year starting January 1, 2020. Questions: a. (10 points) Calculate the trended ultimate loss and ALAE for each accident year. b. (10 points) Calculate the trended on-level earned premium for each calendar year. c. (5 points) Calculate the indicated rate change using the latest three accident years. 3. (25 points) An insurance company has the following data as of December 31, 2018: Accident Year Reported Loss and ALAE ($000s) 2016 2,000 2017 1,750 2018 800 | Calendar Year Earned Premium ($000s) 2016 4,600 2017 5,100 2018 5,800 Development Selected Cumulative Age to Ultimate Development Factors 36 1.46 2.08 4.90 24 12 Date January 1, 2016 July 1, 2018 Rate Change -2% +3% We are also given that - Annual loss and ALAE trend = 4% - Annual premium trend = 3% - Fixed expense ratio = 6% - Variable expense ratio = 26% - Profit and contingencies provision = 5% - ULAE provision as a % of loss and ALAE = 8% - All policies are annual. - Exposures are written evenly throughout each calendar year. - New rates will be in effect for one year starting January 1, 2020. Questions: a. (10 points) Calculate the trended ultimate loss and ALAE for each accident year. b. (10 points) Calculate the trended on-level earned premium for each calendar year. c. (5 points) Calculate the indicated rate change using the latest three accident years