SOFE AFE Certification Exam Questions with AI Explanations

QUESTION: 49

To realize the effect on the "bottom line, " or the net gain from operations, from various transactions, one must consider the amount of any liabilities that are released because of the transaction. Assume a death claim entry as follows:
Death proceeds-ordinary $10, 000
Dividends on deposit disbursed 1, 000
Cash $11, 000
On first appearance, one might think that this will cause the net gain from operations to be $11, 000 lower. However, if the policy has a reserve of $3, 000, the effect on the net gain is only ______________ , because the reserve liability of $3, 000 and the dividend liability of $1, 000 will no longer be shown on the balance sheet

$7, 000
$10, 000
$8, 000
$9, 000

Answer(s): A

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QUESTION: 50

An annuity contract provides:

Either immediately or at some future date, periodic income payments to one or more persons, perhaps with a certain guaranteed number of payments or with a minimum guaranteed amount for those annuities not having life contingencies
Either immediately or at some future date, periodic income payments to one or more persons, perhaps with a certain guaranteed number of payments or with a minimum guaranteed amount for those annuities involving life contingencies
Either immediately or at some future date, perpetual income payments to one or more persons, perhaps with a certain guaranteed number of payments or with a maximum guaranteed amount for those annuities involving life contingencies
Either immediately or at some future date, periodic income payments to one or more persons, perhaps with a certain small number of payments

Answer(s): B

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QUESTION: 51

It refers to items such as interest paid on proceeds from the date due to the date actually disbursed, and to interest on premium deposit funds. These interest items are reflected by the increase in reserves or liability, from one year to the next. What is it?

Interest contract funds
Interest on policy
Contract funds
B or C

Answer(s): D

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QUESTION: 52

To meet informational demands, internal management reporting will entail alternate views of the organization's financial performance. These areas, or views, are including all of the following EXCEPT:

organizational/ business unit (Profit center, department, distribution system etc)
Dealing with processes; product or service lines (i.e. ordinary life insurance, pension services like deferred annuities, group risks such as life or accident and health, etc.)
Dealing with similar risks or characteristics; and customer segment (i.e. individuals with specific levels of net worth, small businesses, large corporations, etc.)
None of these

Answer(s): D

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QUESTION: 53

A stock life insurance company writing both participating and nonparticipating business must follow special accounting procedures under the laws of certain jurisdictions. The purpose of these special accounting procedures is to provide for:

A separation of accounting, so that profits applicable to participating and nonparticipating business can be appropriately determined
This is a critical process, since profits from participating business are regulated as to their distribution among participating policyholders and the company's stockholders
Some jurisdictions require the filing of several of the statutory statement exhibits in three forms, one for the company as a whole
Any of these

Answer(s): A

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QUESTION: 54

Schedule H retains the identity of the Group Accident and Health and the Credit Accident and Health lines of business. However, in Schedule H the line of business designated as Other Accident and Health is subdivided to identify individual policies or elective options. Which of the following is/are out of those classifications?

Collectively Renewable
Cancelable
Guaranteed renewable
Non-renewable for market reasons only

Answer(s): A,C

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QUESTION: 55

The Annual Statement reporting requirements for the participating and nonparticipating branches is limited to major and secondary lines of business, but a company would:

Usually carry this separation throughout all of its premium classifications
Do not carry this separation throughout all of its premium classifications

Answer(s): A

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QUESTION: 56

GAAP have two important functions. First, they provide a set of standards that endeavor to measure with reasonable accuracy the assets held, liabilities owed, revenue earned, and expenses incurred by the company. For life insurance companies these measurement rules have been prescribed specifically for their specialized products. The second important function of GAAP is:

To ensure the comparability of financial data from year to year within each company and with similar data prepared by other companies
To ensure the comparability of financial data
To ensure the comparability of financial data from month to month within each company and with similar data prepared by other companies
To ensure the comparability of financial data from quarter to quarter within each company and with similar data prepared by other companies

Answer(s): A

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QUESTION: 56