2007 General Meeting Assemblée générale 2007 Vancouver, British Columbia

1. 2007 General Meeting Assemblée générale 2007 Vancouver, British Columbia Canadian Institute of Actuaries L’Institut canadien des actuaires

2. General reasons for early presentation Background Review of 2006 Fall Letter content New Educational Notes from last year Implications of CICA Handbook Section 3855 financial instruments on Future Income and Alternative Taxes – update to Fall Letter Use of Actuarial Judgment in Setting Assumptions and Margins for Adverse Deviations Best Estimate Assumptions for Expenses Approximations to Canadian Asset Liability Method (CALM) Margins for Adverse Deviations New or Revised Guidance 2007 CLIFR Fall Letter

3. General reasons for early presentation Avoid distribution near year-end target; AA seminar Allow time for implementation of changes, if any and if applicable Non December 31st financial date, e.g. banks To allow time to receive feedback from practitioners 2007 CLIFR Fall Letter

4. Background Guidance for 2007 Valuation Consensus view of CLIFR Discussed since March meeting CLIFR Committee Chair – Ty Faulds Vice Chair – Les Rehbeli Members – Wally Bridel, Sylvain Côté, Edward Gibson, Greg Lawrence, Marie-Hélène Malenfant, Dale Mathews, Jean Mongrain, Claude Norman, Hélène Pouliot, Sheldon Selby, Mary Stock, Nazir Valani 2007 CLIFR Fall Letter

5. Reminder of last year content Insurance mortality Annuity mortality Scenario assumptions – interest rates Lapse study – Universal Life Consideration in the Valuation of Segregated Fund Annuities Currency Risks Long-term Equity Returns Value of Minimum Interest Guaranteed and Embedded Options Considerations for Amounts on Deposit and Claims Provisions under AcSB Section 3855 Financial Instruments Implication of AcSB Section 3855 Financial Instruments on Future Income and Alternative Taxes Appendices AA scale modification example of scenario assumptions – interest rates example of equity returns for emerging markets 2007 CLIFR Fall Letter

6. Insurance mortality Guidance on the level of mortality improvement None yet available Working Group established to review and recommend guidance to CLIFR lead by Edward Gibson monthly review with CLIFR Update of this committee’s research by Marc-André Belzil 2007 CLIFR Fall Letter

7. Annuity mortality Guidance on the level of mortality improvement for annuity Alternative to the AA scale Also under review by the working group Reviewing new Individual Annuitant Mortality table and plan to provide guidance on its use 2007 CLIFR Fall Letter

8. Scenario Assumptions – Interest Rates Guidance on the interpretation of the new SoP’s 2320 and 2330 CLIFR concerned by the wide range of practice re lack of calibration criteria on stochastic testing working group established lead by Wally Bridel monthly review by CLIFR Constrain the use of stochastic testing parameters appropriate to Canadian life insurance financial reporting encompass the nine prescribed scenarios review parameters if tVx lower than CTE 80% tVx ≥ prescribed scenario #9 Ed Note targeted for 2008 release 2007 CLIFR Fall Letter

9. Lapse Study – Universal Life 2003 UL Level COI lapse study appropriate for the first 5 policy durations, but lack of UL-specific drivers Similarity with stand-alone T-100 Expect updated experience study to be released shortly and will reflect in updated guidance 2007 CLIFR Fall Letter

10. Valuation of Seg Funds (quick review of last yr – come to tomorrow’s session) Acquisition Expenses Liability Related to Seg Fund Guarantees Hedging Session tomorrow Ed Note in progress 2007 CLIFR Fall Letter

11. Currency Risks CLIFR recommendation Planning to eliminate the reference to integrated multi-currency interest-rate models Use of currency forwards if not available use of interest rate differentials MfAD ranges from 5% to 50% Expected Ed Note soon 2007 CLIFR Fall Letter

12. Long-Term Equity Return Canadian market historical period – Begins in 1956 Other mature markets historical period – consistent with recommendation for Canadian market Less stable or emerging markets limit the risk premiums (net of MAD) to the assumed Canadian equities Process for an Ed Note has begun 2007 CLIFR Fall Letter

13. Value of Minimum Interest Guarantees and Embedded Options Low current economic environment Not captured by deterministic scenarios 2007 CLIFR Fall Letter

14. Considerations for Amounts on Deposit and Claims Provisions under AcSB Section 3855 Financial Instruments Concerns if liability valued without interest adjustment Guidance on presentation in financial statements 2007 CLIFR Fall Letter

15. Implication of AcSB Section 3855 Financial Instruments on Future Income and Alternative Taxes Guidance on the new tax timing differences from finance proposal Included in a Supplement to last years fall letter 2007 CLIFR Fall Letter

16. New Issues for 2007 Fall Letter Tax implications of 3855 will be continued Anything else? 2007 CLIFR Fall Letter

17. Section 1220 of the Standards .01The actuary should be familiar with relevant educational notes and other designated educational material. .03 A practice which the notes describe for a situation is not necessarily the only accepted practice for that situation and is not necessarily accepted actuarial practice for a different situation. Available on CLIFR Website Fall Letter and Published Educational Notes