[[Actuarial Notes Wiki|Wiki]] / [[Exam 5 (CAS)]] / **Calendar Year** ## Definition ==Calendar Year== Calendar year is a data organization method where premiums, losses, and expenses are grouped by the calendar year in which transactions occurred, regardless of the policy effective date or accident date. ## Key Features ### Premium Recognition - **Written Premium:** Premiums for policies written during the calendar year - **Earned Premium:** Portion of written premium earned during the calendar year - Includes premium from policies effective in prior years ### Loss Recognition - **Paid Losses:** Amounts actually paid during the calendar year - **Incurred Losses:** Losses occurring or reported during the year (depending on accounting basis) ### Applications **Financial Reporting** - Statutory financial statements - GAAP reporting - Tax reporting **Cash Flow Analysis** - Actual cash receipts and disbursements - Liquidity management - Investment planning **Operational Metrics** - Combined ratio - Premium growth - Quarterly performance ## Advantages 1. Matches accounting periods 2. Readily available from financial systems 3. Simple to understand and communicate 4. Aligns with fiscal reporting requirements ## Disadvantages 1. Mixes multiple policy periods 2. Premium and loss may not match well 3. Less useful for rate adequacy analysis 4. Affected by seasonality ## Example ``` Calendar Year 2024 includes: - Premiums written for policies effective anytime in 2024 - Earned premium from policies effective in 2023, 2024, or 2025 - Losses paid or reported in 2024 from any accident year - Expenses incurred during 2024 Policy effective 10/1/2024 (6-month term): - CY 2024 written premium: Full premium - CY 2024 earned premium: 3 months (10/1-12/31) - CY 2025 earned premium: 3 months (1/1-3/31) ``` ## Related Concepts - [[Ratemaking Data Organization]] - [[Accident Year]] - [[Policy Year]] - [[Earned Premium]] - [[Written Premium]] ## References - Werner & Modlin, Chapter 3