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3 categories of methods for determining UW PM
 Investment Income offset: start w/ U^{0}, adjust to account for investment income
 Target Total return income: seek to ensure that the pricing will lead to a target expected total SH return
 Cash Flow methods: relies on actual premium, losses, expenses, and tax cash flows

7 methods for determining UW PM
 Calendar Year Investment offset
 Present Value offset
 Calendar year ROE
 IRR on equity flow
 PVI / PVE
 PV Cash flow return
 Riskadjusted discounted cash flow

UW PM: Calendar Year investment income offset
 U = U^{0}  i_{AT}(PHSF)
 PHSF = UEPR + L&LAE reserves
 UEPR = UEPR net of prepaid exp  P receivables
 L&LAE reserves = LR * (Loss reserves/Inc loss)
 + simple to implement using readily available data; results are relatively stable
  stability issue when rapid growth or decline in vol

UW PM: Present Value offset
 P = [L + EXP  L{PV(X^{0})  PV(X)}] / (1  U^{0})
 U = U^{0}  PLR[PV(X^{0})  PV(X)]
 + simple, does not rely on historical ratio, avoids having to select a target return
  stability issue when rapid growth or decline in vol

UW PM: Calendar Year ROE
 ROE = (U  P + II  FIT) / EQ
 Set target and solve for U
 + most of the input is readily obtained from rptd financial statments
  subject to distortion during periods of growth; requires a target ROE and a P/S ratio

UW PM: IRR on Equity Flow
 Track the equity flow that would occur had we set up a company to write a single policy, and set it equal to initial investment
 0 = ∑ [INC_{j} + SCHNG_{j}] / (1 + IRR)^{j}
 + simple to interpret; captures impact of accounting rules on SH
  need assumption about surplus; target IRR required

UW PM: PVI / PVE
 Ratio is interpreted as rate of return and used to compare against target
 PVI = (1 + i)∑_{j=0} (INC_{j})v^{j}
 PVE = ∑_{j1} (EQB_{j})v^{j1} / ∑_{j=1} v^{j1}
 + not distorted by historical; balance sheet growth rates; somewhat comparable to GAAP ROE
  requires a selection of discount rates

UW PM: PV Cash Flow return
 PV(∆EQ; r) = PV(TCF; i)
 + appealing focus on PV(UW CF)
  no easy way to reconcile to a GAAP ROE measure

UW PM: Riskadjusted discounted CF Method
 PV(P; i_{f}) = PV(L; i_{r}) + PV(FX; i_{f}) + t * PV(Inv Inc on surplus) * (1  t)^{1}
 i_{r} = i_{f} + β(i_{m}  i_{f})
 + somewhat solid theoretical foundation; don't need target return
  uncertainty in estimating liability β

