CICA 3855 – one company’s approach CIA General Meeting October 19-20, 2006 Chicago.

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CICA 3855 – one company’s approach CIA General Meeting October 19-20, 2006 Chicago

CICA 3855 – one company’s approach s.3855 One company’s approach Gianni Fiacco CIA Annual Meeting  Assemblée annuelle de l’ICA

CICA 3855 – one company’s approach Classifying Financial Instruments Category Held for Trading (HFT) Available-for-sale (AFS) Held-to-maturity (HTM) Loans and Receivables  Insurance contracts excluded  Real estate not addressed – continue to defer & amortize realized and unrealized at 3% per quarter

CICA 3855 – one company’s approach Liability Segment Life insurance company CALM Liability segment Liability Segment Non CALM liability segments (bank, P&C) Surplus Segment Life insurance company Surplus Segment Non life insurance company Cash, LPCD’sCash (cost) Public bondsFair Value (FV)Available for sale Private bondsLoans MortgagesLoans Stocks - public Fair Value (FV)Available for sale Stocks– private if reliable fv Fair Value (FV)Available for sale Real estateMove to marketDepreciated costMove to marketDepreciated cost DRAFT 3855 classifications

CICA 3855 – one company’s approach Derivatives and election of hedge accounting Current CGAAP –If in a hedge = valued on the same basis as the hedged item. –If not in a hedge = treated like an equity (move to market at 5% per quarter) Current USGAAP and future CGAAP –Derivatives always carried at fair value. –Unrealized gains/losses flow through income unless the derivative is a cash flow hedge or net investment hedge, then effective portion of the unrealized gains/losses are recorded in OCI. Hedge accounting Is optional. Ineffectiveness flows through income. Should elect for AFS & loans portfolios

CICA 3855 – one company’s approach Downstream Issues of Investment systems/processes will change 2.Yield analysis will change 3.CALM roll-forward will be re-worked 4.Crediting rate process to change due to yield changes – no more smoothing via DRGs of today 5.External disclosures change 6.More things to analyze and tie together during the “close period”

CICA 3855 – one company’s approach Project approach 1.Project structures in place (steering group, project group, implementation plans) 2.Started out with the analysis and design recommendations ensuring each area understood the interdependencies and the recommendations worked for all (mostly Corporate accounting, actuarial, ALM and Investments). 3.Phased education roll out and communication plans 4.Expanded working group and detailed project status reviews to include business areas 5.Project plans continue to be refined to ensure we are ready for January 1, 2007 go live date for investments and reserve processes have updated for opening and Q1 reserve calculation