MSA ratios

Question 1

give 4 examples of company characteristics not captured in MSA ratios

Answer 1

• subjective analysis of market position
• quality of management
• quality of reinsurance
• prospects for growth and innovation

Question 2

what does diversification score measure?

Answer 2

• measures how closely the insurer tracks the overall Canadian market in terms of geographic and LoB spread
• if diversification score >65, company is highly diversified

Question 3

give examples of an insurer with a low / high diversification score

Answer 3

low: niche insurers
high: national, multi line writers

Question 4

compare the MSA ratios, ROE ROR

Answer 4

ROE is return to shareholder’s per unit of capital
ROR is income relative to revenue generating capacity