Moderator: Stefanie J Porta ASA,MAAA. Presenters: Ingrid H Guttin FSA Scott D Haglund FSA,MAAA Scott D Houghton FSA,MAAA

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1 SOA Antitrust Disclaimer SOA Presentation Disclaimer Session 30PD: Relationships Between Auditors and Valuation Actuary Moderator: Stefanie J Porta ASA,MAAA Presenters: Ingrid H Guttin FSA Scott D Haglund FSA,MAAA Scott D Houghton FSA,MAAA

August 28,2017 Federated Mutual Insurance Company

federatedinsurance.com Presented by: Scott D.

2 Relationships Between Auditors and Valuation Actuary Valuation Actuary Symposium Session 30 August 28,2017 Federated Mutual Insurance Company Owatonna, Minnesota Phone Presented by: Scott D. Haglund, FSA, MAAA VP & Director of Actuarial Services Life

3 Working with auditors Before the audit During the audit After the audit What should be expected

4 Before the audit What benefit are you expecting from the audit? What bar are you holding yourself accountable to? Is the auditor an antagonist or support system for you?

5 Before the audit Understand the scope of the audit Internally, discuss the audit with all impacted functional areas Set expectations for audit results, and expectations in working with auditor Confirm expectations with the auditor

6 Before the audit Set and manage appropriate timelines Internal timelines: consider the efforts required needed for day-to-day operations Financial reporting Corporate projects Auditors: may need to be flexible in when items are due so company can complete necessary projects

7 Before the audit Provide auditors with guidance on who they should contact with questions Assign an internal point-person for when it isn t clear Provide insurer with guidance on who they can reach out to with questions Similar to internal contacts, who is the account manager for misc. questions

8 During the Audit Build a positive relationship with the auditor Avoid providing requested information more than once Use of central portal will allow all involved to see information was provided Central portal provides security that does not

9 During the Audit Focus on providing what auditor needs to know Your role isn t teaching, it is there to provide the necessary details As applicable, refer auditor to their internal resources for assistance on questions Consider the effort of providing something they asked for but don t need vs. effort of successfully pushing back on the request Auditor is likely not a product expert, so may not fully understand what is needed or what they asked for

10 After the Audit Document what was requested, making sure files used are retained Complete in the before / during / after phases Discuss and evaluate the audit process Both internally and with the auditor Compare what happened against the scope and expectations Review any issues / problems

11 After the Audit Appropriately correct issues identified during the audit Document what would make the audit go more smoothly next time Take action based on issues that were found All of us can make mistakes and improve - not a pride thing

12 Other Considerations Ideally the individuals doing the audit would be specialized in what they are reviewing Likely, the person doing the audit is good at auditing but does not know your products / processes At a minimum, it would be preferred that the person meeting with you would have a basic level of product / industry knowledge In most situations, the person you are working with one year may not be the one you work with the following year Any training you did with the prior year individual is not present in the person doing this year s audit The new person will likely lack knowledge of your products and processes, so will be starting over each year on explaining your company

13 Other Considerations Some benefits of the audit Forces you to look at processes in your company that may not get reviewed very often Due to the insignificance of the product / process, this may be the only time a process if formally reviewed Audit is a mechanism to improve how the work is being performed

14 Recap Communicate Expectations, who to contact, scope Provide what is needed, not necessarily what is requested Get a better definition of the question being asked Document this year, evaluate and prepare for next year

15 Relationships between auditors and valuation actuaries 2017 Valuation Actuary Symposium Ingrid Guttin August 28, 2017

16 Auditor client relationship Leading practices in audit execution Company perspective Auditor perspective Value-add opportunities Professional responsibilities related to the audit Audit trends PwC Relationships between auditors and valuation actuaries 2

17 Leading practices Audit execution Audit strategy Success definition Communication needs Deliverables PwC Relationships between auditors and valuation actuaries 3

18 Leading practices Company perspective Audit strategy Definition of success Communication needs Deliverables Internal actuarial calendar (experience studies, assumption unlocking, close schedule) Identify on-site meetings and checkpoints for audit team Adherence to timeline Transparency and completeness of analysis Timely communication of issues Valuation point of contact Frequency of touchpoints Templates for documents and reports Processes documented in compliance with professional standards PwC Relationships between auditors and valuation actuaries 4

19 Leading practices Auditor perspective Audit strategy Definition of success Communication needs Deliverables New issues list Alignment on focus and prioritization of audit Consistency in staff background and knowledge year over year Timely execution Quality versus efficiency Share purpose underlying audit requests Identify auditor point of contact Articulate anticipated format of client response Internal coordination Document transfer approach Central repository PwC Relationships between auditors and valuation actuaries 5

20 Value-Add opportunities Industry insight PCAOB current interests Experience studies Level of documentation Evidence of challenge process Organizational Line of Sight Visibility across organization Connections between departments Industry trends Share industry insights and trends FASB/IFRS pronouncements PBR Strategic Assessments Opportunities to leverage audit knowledge Leading practices among peers in the same and other industries Audit training What does compliant documentation look like? Validation methods PwC Relationships between auditors and valuation actuaries 6

21 Professional responsibilities Model Governance All documentation required by this ASOP should include a statement of the purpose of the documentation and sufficient details to enable another actuary qualified in the same practice area to understand the matters involved and assess the judgments made. Use of principles-based approaches The qualified actuary is responsible for reviewing and approving assumptions, methods, and models that are used in determining principle-based reserves, as well as for reviewing and approving internal standards for actuarial valuation processes, internal controls, and documentation used for such reserves Examples of professional responsibilities Actuarial communications An actuary should consider retaining sufficient information for any recurring project so that another actuary could assume the assignment. Relationships with auditors The responding actuary should be prepared to discuss the following items, based on existing documentation the data used, the source of prescribed assumptions, the methods used, and the basis for assumptions that are not prescribed PwC Relationships between auditors and valuation actuaries 7

22 Audit trends Consideration of actuarial functions not directly related to financial statements Enhanced and modified procedures to address planning, execution, and actuarial judgment Increased focus on assumptions and model governance PwC Relationships between auditors and valuation actuaries 8

Thank you! Ingrid Guttin Manager, US Actuarial Services Telephone: (515) 240-3611 Email: ingrid.guttin@pwc.

23 Thank you! Ingrid Guttin Manager, US Actuarial Services Telephone: (515) This document has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details.

Session 03PD: PBR Reporting and Disclosures Thinking About the End at the Beginning. Moderator: James Russell Collingwood ASA,MAAA

Session 03PD: PBR Reporting and Disclosures Thinking About the End at the Beginning SOA Antitrust Disclaimer SOA Presentation Disclaimer Moderator: James Russell Collingwood ASA,MAAA Presenters: James