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Financial AFE Exam
Accredited Financial Examiner (AFE) (Page 7 )

Updated On: 12-Jan-2026
Page 7 of 59
PDF with 286 Questions

Life insurance companies frequently make mortgage loans to affiliated companies (such as subsidiaries or companies owned by a common parent company) and to joint ventures in which the life insurance company is a joint venturer. The company must carefully examine:

  1. An affiliated company or joint venture and the transactions related to it
  2. The propriety of the accounting treatment for each loan to an affiliated company or joint venture and the transactions related to it
  3. The propriety of the accounting treatment for each loan
  4. None of these

Answer(s): B



Financial Statements provide additional valuable information on the loans. Some of the more significant information provided includes EXCEPT:

  1. The valuation of the mortgage loan portfolio, including a description of the valuation basis for mortgage loans and income recognition
  2. The recorded investment and interest past due on mortgages with interest more than 90 days past due
  3. The recorded investment and number of mortgages on which interest has been reduced, and the percent the interest was reduced
  4. Disclosures of impaired loans: The total recorded investment in impaired loans at the end of each period

Answer(s): B



Admitted assets are those specifically prescribed by the NAIC Accounting Practices and Procedures Manual or prescribed or permitted by the various jurisdictions. An admitted asset is defined as having probable future economic benefits. It also has three essential characteristics. Which one of the following is out of those characteristics?

  1. It embodies a probable future benefit which contributes to cash flow
  2. A particular entity can obtain this benefit
  3. The transaction giving rise to entity's right to control the benefit has already occurred
  4. All of these

Answer(s): D



A Company's investments are admitted assets properly valued which support the reserves and liabilities, including required capital and surplus. Many jurisdictions permit companies to make some investments that do not meet all of the strict regulatory requirements. These additional investments are often referred to as basket assets. Which of the following is/are true for Basket assets?

  1. They have been made out of a company's free surplus
  2. Mortgage loans are first liens on the property backing them. Second or third-lien mortgages typically qualify as "basket" loans
  3. A particular entity can obtain this benefit
  4. They record investment and number of mortgages on which interest has been reduced, and the percent the interest was reduced

Answer(s): A,B



Policy loan:

  1. On policies are valuable to the policyholders, and insurers encourage them to protect this feature by saving it for emergency use
  2. Interest rate is raised to eight percent
  3. Interest rate was raised to eight percent, and later variable rates were approved
  4. Do not have variable principal payments or a maturity

Answer(s): A



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