TheActuaryEarningsManagement.pptVIP

The Actuary Earnings Management Casualty Actuarial Society-Annual Meeting November 14, 2000 Moderated by: Marc F. Oberholtzer, FCAS Principal Consultant, PricewaterhouseCoopers LLP The Actuary Earnings Management-Why Now? Increased scrutiny by SEC, press. Past history is not indicative of current or future environment Message: Awareness needs Heightened for Actuaries Understand how actuarial work is incorporated into quarterly financial reporting Be congizant of SEC’s, press’ and others’ perception of actions The Actuary Earnings Management-Opening Ideas ABC Ins Co typically reserves 3%-5% above internal actuary estimate. In a quarter, ABC reserved 1% above estimate. Do you construe this as (a) normal volatility or (b) earnings management? Same situation, but ABC now exceeds expectations; reserving at 3% redundant, ABC would have fallen short. The Actuary Earnings Management-Opening Ideas ABC Ins Co purchases a finite aggregate reinsurance cover. Contract barely transfers enough risk transfer to qualify. ABC is now very likely to meet its publicized goal of a combined ratio below 105%. Do you construe this as (a) earnings management or (b) a shrewd business decision? The Actuary Earnings Management-Defined Actions taken without a specific event to justify the accounting to alter results where the perceived motivation is to comply with certain expectations Or the lack of action with a specific event PC insurers are susceptible to scrutiny; timing of earnings are heavily dependent on estimates The Actuary Earnings Management-Panelists Matthew Adams, CPAPartner, PricewaterhouseCoopers LLP  Albert D. Ciavardelli, CPAVice President-Finance, PMA Capital Corp William M. Wilt, FCASVice President, Moody’s Investor Services The Actuary Earnings Management An Auditor’s Perspective Matthew Adams, PricewaterhouseCoopers LLP The Actuary Earnings Management Wall Street’s Expectations - How Does Your Company Measure Up? Al Ciavardelli PMA Capital Corporation Earn