1. TEAM FINANCE Allianz Group 1 Broadening The Audience Actuarial Interaction With Chief Financial Officers 2002 Casualty Loss Reserve Seminar September 23, 2002 Arlington, Virginia Presented By Andrew E. Kudera, FCAS,MAAA,ASA,FCIA

2. TEAM FINANCE Allianz Group 2 Introduction  Why is it important to make sure pricing, reserving, planning, and forecasting are all in alignment?  How to align all of these items?  Why is it important to be aligned from the perspective of the business owners and the CFO?

3. TEAM FINANCE Allianz Group 3 Why Align Pricing And Reserving?  To encourage healthy dialog and various points of view because of uncertainty  These figures will ultimately feed financial statements for reporting purposes  The results of not doing so are poor business decisions and these ultimately lead to becoming a dysfunctional organization

4. TEAM FINANCE Allianz Group 4 Why Align Pricing And Reserving (cont’d )  If long tail lines of business and use fixed loss ratio approach on income statement – andy, not sure what you mean here.  Incentive compensation may be based on these figures  Outsiders view of organization - rating agents, reinsurers etc.

5. TEAM FINANCE Allianz Group 5 How to Align Pricing,Reserving,Forecasting,And Plan  Have one actuary do it all  Develop an algorithm or procedure with various levels of review by interested parties  Make this a continuous part and important part of the organizational culture

6. TEAM FINANCE Allianz Group 6 Why Is It Important to? Monitor The Business Owners?  Evaluation of results and ability to continue on with certain segments of business or programs  It aids in the planning process with respect to necessary action steps and milestones- rate, re- underwriting, etc.  It can be used as an early warning sign either good or bad

7. TEAM FINANCE Allianz Group 7 Why Is It Important To Keep The CFO In The Loop?  Avoid surprises  Management of margin, surplus levels, level of debt, reinsurance  Largest liability item on the balance sheet  Incentive compensation pool

8. TEAM FINANCE Allianz Group 8 What Is The Risk Of Not Doing This?  Poor business decision  Dysfunctional organization  Sub optimal performance  Pressure on ratings of company

9. TEAM FINANCE Allianz Group 9 When Does All This Get Done?  At all times with a fluid dialog  Quarterly and year-end closes  During the planning cycle

10. TEAM FINANCE Allianz Group 10 What Can A Reserving Actuary Do To Help This Situation?  Provide tools to the CFO/business  Communicate with the pricing actuary  Communicate with the business folks

11. TEAM FINANCE Allianz Group 11 Questions?