Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., 2004 CREATIVE WANDERINGS Changing Tactics in Interesting Times Presented by: Stephan L. Christiansen Director of Research, Conning Research & Consulting, Inc.

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Or, … Can an Actuary chart a smooth career course without too much tacking?

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., 2004 Topics for Discussion What do I do today? What is typical of what I do? What is my background– How did I get here? Why did I choose this direction? How does my Actuarial training help? What additional skills do I need? What should an Actuary do to follow this path?

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., For now, the Wind is at my Back, I Love What I Do!

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., What do I Do Today? Two Primary Career Discussions Director of Research, General Manager Conning Research & Consulting, Inc. (Previously) Senior Partner, Private Equity Investments Conning Capital Partners, LLC

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Conning Research & Consulting, Inc. Strategic Research and Information Services Serving the Insurance Industry for 40 Years Property-Casualty, Life, Health-Managed Care Forecasts, Strategic Issues, Segment Analysis Applied Consulting: Benchmarking, Custom Research Presentations and Conferences

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., What is Typical of What I Do? Establish Budget, Set Annual Research Agenda Managing Editor, Product Development Manage Sales and Marketing Press Interviews, Public Relations Presentations and Conference Development Consulting Applications, Toolkit Development Specialized Research

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Keeping an eye on what’s happening in the Insurance Industry

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Example: Forecasting/Benchmarking Income in the Property-Casualty Sector Source: National Underwriter Insurance Data Services/Highline Data., Conning Analysis After-tax Statutory Income with Estimate for Hurricane Frances Hurricane Charlie was within our forecast We are assuming an additional $7 billion in net cost for Frances and Ivan at this time

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Property exposure keeps growing: Global insured property losses Worldwide insured losses, 2002-$ billion Source: Swiss Re, sigma 1/2004

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Premium Growth in Selected Lines Continued Challenges of the Cycle The Property- Casualty Pricing Cycle has been a challenge particularly for Reinsurance and Commercial Lines Hypothesis: Driven by measurements based on Premium, not Exposures Sources:A. M. Best, National Underwriter Insurance Data Services/Highline Data, Conning Analysis

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Statutory Return on Surplus P-C Sector Profitability by Line of Business Strongest results in Property, followed by Commercial Auto, CMP, and Personal Auto based on statutory income and allocated capital GL and Med Mal challenged by reserve additions Source: National Underwriter Insurance Data Services/Highline Data, Conning Analysis

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Capital Markets are Favorably Impressed Source: Bloomberg S&P vs. Insurance Components Both Life and P-C sectors have outperformed the S&P since 2002– improving access to capital and opportunities to fund M&A

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Strategic Issues: Life-Health Life and Health Portability Long Term Care Market Penetrating the Middle Market Life Settlements and Arbitrage Disease Management L&H Investment Profile Additional Products and Services Insights and Outlooks on 26 Insurance Segments P-C and L-H Forecasts by Line of Business P-C Market Analysis and Benchmarking Services Newsletter Strategic Issues: Property-Casualty Cycle Management Small Business Market Excess & Surplus Lines Alternative Markets Changes in Workers Comp P&C Investment Profile Sample of Research and Services 2005

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Also Talk About Conning Capital Partners, LLC Private Equity for the Financial Services Industry Over Eighteen Years, $600 Million Managed Role of Senior Partner Deal Sourcing, Evaluation, Negotiation, Structuring Board Governance, Enhance Business Development, Partner with Management and Co-investors Anticipate, Execute Exit Strategy Raise the Next Fund

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Examples of Investments Discover Re, Inc. Start-up Alternative Markets Underwriter Deal Sourced through Hartford Connections Put together Investment Consortium Exit through Sale Cox Insurance Holdings, Ltd. Deal Sourced through Lloyd’s Connections Second Stage Investment/ Lloyd’s Integrated Vehicle Deal Exited through Secondary Offering USI Insurance Services, Inc. Deal Sourced through Venture Capital Relationships Acquisition Model Insurance Broker Deal Exited through IPO and Sale of Securities

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Why Did I Choose This Direction?

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., What is My Background? Insurance Company of North America Actuarial Training – Associate Actuary Colonial Penn Insurance Company Actuarial Fellowship, Product Management Strategic Planning, Marketing Conning & Company Strategic Consulting, Industry Research Venture Capital, Private Equity Lloyd’s Syndicate Analysis Research, Publications & Consulting

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., Seeking Creative Outlets Entrepreneurial Organizations Communication Skills Highly Valued Industry Perspective Ability to Grow with Organization Variety of Opportunities

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., And a Chance to Climb the Ladder

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., How Does Actuarial Training Help? Broad Interdisciplinary Insurance Skills Highly Analytic: Loss Reserves, Knowledge of Risk Familiarity with Statutory, GAAP Accounting, Modeling and ALM, Investments, Capital Markets Continuing Education– Actuarial and Other Actuarial Networking

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., What Other Skills Are Needed? Highly Developed Writing and Communication Business and Financial Skills– P&L Management Sales and Marketing Energy

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., 2004 Closing Thoughts Actuarial training can lead to broad opportunities: Understanding Risk, and skills in anticipating future events, have broad applications throughout insurance, financial services, and business in general. A Life-time approach to learning and broadening of perspective can position actuaries to respond to change and even anticipate change. Communication Skills are Key in management, investing, and developing a flexible career path. Opportunities come from unexpected sources: good preparation will make you ready to take advantage when opportunity knocks.

Actuaries in Non-Traditional Roles CAS Fall Meeting November 17, 2004 Montreal, Quebec, Canada © Conning Research & Consulting, Inc., For the Trim and Yare, Strong Wind a’Beam And Sure Sailing Ahead