My main question is on the recommendation for whether reinsurance should be purchased.
The company's net income without reinsurance is $76,439, and for either type of reinsurance treaty the company will have negative net income (either negative $323k or negative $355k).
The solution states that reinsurance has a small negative impact on net income.
Am I missing something here? It seems like going from +$76k to -$323 is a huge negative impact. I.e., the company goes from making money to losing money. It seems weird that the recommendation is to go with reinsurance, even though it reduces net income by more than 500% (and, not only that, but it makes net income negative).
Any one else have the same thoughts as me?
The company's net income without reinsurance is $76,439, and for either type of reinsurance treaty the company will have negative net income (either negative $323k or negative $355k).
The solution states that reinsurance has a small negative impact on net income.
Am I missing something here? It seems like going from +$76k to -$323 is a huge negative impact. I.e., the company goes from making money to losing money. It seems weird that the recommendation is to go with reinsurance, even though it reduces net income by more than 500% (and, not only that, but it makes net income negative).
Any one else have the same thoughts as me?
Mate #5 (2010 CSP #13)
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