The exposure is split into three geographic regions: region A, region B and region C. The following accident year 2 data is available:

Region	Current Relativity	Exposure Weight	Ultimate Losses
A	1	40%	645,000
B	1.28	25%	480,000
C	0.5143	35%	285,000

Suppose the following is true:

• Loss cost inflation is 5% per annum.
• There are no fixed and variable underwriting expenses.
• The insurer is targeting a profit percentage of 15% while retaining current rate relativities.

The insurer determines, using the loss ratio method, that rates should be increased by 10% for calendar year 3. Determine the earned premium at current rates during accident year 2 for region B.

The midpoint of the experience period is 07/01/CY2 and the midpoint of the forecast period is the end of calendar year 3; hence, the trend factor equals 1.03^1.5 = 1.0453, the projected ultimate inflation adjusted losses for accident year 2 equals $1,410,000 and, given a stated rate increase of 10%, the projected loss ratio must equal 0.9353. If the projected loss ratio equals 0.9353, then the aggregate earned premium at current rates equals $1,507,538. The proportion of the aggregate earned premium attributed to region B equals

1.28*0.25/(0.4 + 1.28*0.25 + 0.5143*0.35) = 0.3556

which in turn implies that the earned premium at current rates for region B equals $536,080.5.