SOURCE OF EARNINGS DISCLOSURE Helmut Engels June 29, 2005 CIA Annual Meeting Session 5609

More Emphasis on Disclosure International THREE PILLAR approach Pillar 1 – Capital Requirements Pillar 2 – Supervision Pillar 3 – Market Disclosure The Source of Earnings (SOE) was identified as a good addition to Pillar 3 in Canada Stakeholders: shareholders, policyholders, analysts, directors, management, regulators

Source of Earnings Existing disclosure requirements Insurance Companies Act CICA public disclosure requirements OSFI guidelines Sources of Earnings Guideline D-9 Issued December 2004 Effective for 2004 year-end

Source of Earnings SOE Guideline Requirements: For Canadian life insurance companies If an public Annual Report, then include SOE in one of MD&A, Notes or Supplementary Disclosure If no Public Annual Report, then publicly available on request or on a web site

Source of Earnings Format for SOE Expected Profit on In-Force Business Impact of New Business Experience Gains & Losses Management Actions and Changes in Assumptions Other Earnings on Operations (pre-tax) Earnings on Surplus Income before Income Taxes Income Taxes Net Income

Source of Earnings Survey of Companies 36 Companies Format for SOE Table Where Disclosed Disclosure of Methodology Explanation of the Numbers

Future Additional Disclosures Participating Accounts Smoothing of Income

Future Additional Disclosures International Association of Insurance Supervisors Standard on Disclosures Concerning Technical Performance and Risks for Non-Life Insurers and Reinsurers – October 2004 Standard on Disclosures Concerning Investment Risks and Performance for Insurers and Reinsurers – Draft, Final October 2005 Standard on Disclosures Concerning Technical Performance and Risks for Life Insurers - 2006 Standard on Disclosures by Insurers and Reinsurers - 2007