Can We Talk ? Rose D. BarrettMartin T. KingRichard O. KirsteMark Priven

CAS Spring MeetingSan Diego, CAMay 21, 2002

Can We Talk ?

Skit 1 * Exam * Prizes

Skit 2 * Exam * More Prizes

Skit 3 * Exam * Grand Prize

CAS Spring MeetingSan Diego, CAMay 21, 2002

Arnold B. Nerdly, FCAS, MAAA

Occupation: ActuaryCareer Path:

1989 BS, Mathematics1991 MS, Statistics1992 Assistant Junior Analyst I1996 ACAS1997 Assistant Actuary1999 FCAS2002 Vice President

CAS Spring MeetingSan Diego, CAMay 21, 2002

Quiet Please. Exam in Progress.What are legitimate reasons for someone to be attending this 8am multi-general session?

I. Too cheap to buy a breakfast. No plans to attend any sessions; but, after eating the freebie bran muffin, found himself/herself with some time to kill before the weather warms up at the pool.

a. I and IIb. I and IIIc. II and IIId. all of the abovee. none of the above

II. Need to fulfill continuing education requirements; and this session seemed slightly less boring than ERM & Disaster recovery.

III. Figured that he/she might have something to learn here.

Quiet Please. Exam in Progress.What are legitimate reasons for someone to be attending this 8am multi-general session?

I. Too cheap to buy a breakfast. No plans to attend any sessions; but, after eating the freebie bran muffin, found himself/herself with some time to kill before the weather warms up at the pool.

II. Need to fulfill continuing education requirements; and this session seemed slightly less boring than ERM & Disaster recovery.

III. Figured that he/she might have something to learn here.

c. II and III

Correct Answer...

October 31, 1992

Arnold Nerdly

Assistant Junior Intern Actuarial Analyst I

CAS Spring MeetingSan Diego, CAMay 21, 2002

Workers' Compensation Loss Ratio Analysis

Prepared by Arnold NerdlyAssistant Junior Intern Actuarial Analyst I

October 31, 1992

Workers' Compensation Loss Ratios

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992

Accident Year

Loss

Rat

io

Workers' Compensation Profitability Analysis

0

0.1

0.2

0.3

0.4

0.5

0.6

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992

Accident Year

Loss

Rat

io

analysis poisson values3.8505E+12a

pareto values3.849E+12a

48747.2904b

48729.022b

1982 1983 1984 1985 1986 198712 43,505 46,293 46,545 54,194 83,087 83,693 7000159649 9136600 31-May-94 MEAD24 44,255 58,227 50,808 48,731 69,045 69,319 7000159699 9136700 30-Nov-95 WILLIAMS36 74,061 69,303 70,787 71,365 71,071 71,071 92000150003 9132000 03-Jun-93 KINGSTON48 74,082 71,747 96,708 92,473 91,800 91,278 92000150004 9136701 31-Mar-96 CALAUSTRO60 106,719 133,284 143,680 156,401 175,117 164,603 92000150007 9136701 31-Mar-96 MOTEN72 59,905 72,815 54,998 53,939 53,964 53,964 92000151565 9136701 31-Mar-96 HSIU84 142,275 134,777 147,737 163,401 174,541 184,517 CHC80075988 9122400 05-Mar-92 WOODWARD96 166,101 209,869 297,819 313,195 317,093 312,717 CHC80079986 9127301 17-Dec-92 FELICE

108 201,945 331,113 281,977 292,058 334,082 301,073 DTC80024296 9132000 27-Sep-93 WARD120 251,627 477,459 663,460 878,375 881,339 899,644 DWC80044236 9118700 30-Jan-91 HOLMES132 628,634 1,006,108 1,328,028 1,271,552 1,375,665 1,386,551 DWC80053253 9127301 15-Oct-92 BOUDREAUX144 189,635 562,379 513,080 971,194 631,993 616,112 EHB80000045 9132000 18-Nov-93 ENDRESS156 409,030 609,724 860,491 918,760 1,068,932 EHB80000208 9132000 23-Feb-94 DRAPER168 384,084 723,390 718,359 867,886 EHB80000330 9136600 04-May-94 SHEHAB180 576,467 641,546 920,947 EHB80000462 9136600 18-Jul-94 GRESKO192 563,677 755,771 EHB80000592 9136600 09-Sep-94 DEMAREST204 412,213 EHB80000610 9136600 26-Sep-94 PETTINATO19821983 1984 Data Total EHB80000610 9136600 26-Sep-94 PETTINATO### 46293 46545 Count of 1984 1 EHB80000610 9136600 26-Sep-94 PETTINATO

Average of 1985 54194 EHB80000610 9136600 26-Sep-94 PETTINATOSum of 1986 83087 EHB80000610 9136600 26-Sep-94 PETTINATOCount of 1986 1 EHB80000610 9136600 26-Sep-94 PETTINATOProduct of 1987 83693 EHB80000610 9136600 26-Sep-94 PETTINATO

46293 Count of 1984 1 EHB80000610 9136600 26-Sep-94 PETTINATO46293 Average of 1985 54194 EHB80000610 9136600 26-Sep-94 PETTINATO46293 Sum of 1986 83087 EHB80000610 9136600 26-Sep-94 PETTINATO46293 Count of 1986 1 LRC80008694 9132001 13-Sep-93 FURR46293 Product of 1987 83693 NMU80041038 9127300 17-Dec-92 TOBIN

43,505 Count of 1984 1 NMU80042134 9127300 17-Mar-93 FERRARA

GL TREND ANALYSIS Page 1 of 27

analysis poisson values 3.85045E+12 pareto values 3.84901E+12

1982 1983 1984 1985 1986 198712 43,505 46,293 46,545 54,194 83,087 83,693 7000159649 9136600 31-May-94 MEAD24 44,255 58,227 50,808 48,731 69,045 69,319 7000159699 9136700 30-Nov-95 WILLIAMS36 74,061 69,303 70,787 71,365 71,071 71,071 92000150003 9132000 03-Jun-93 KINGSTON48 74,082 71,747 96,708 92,473 91,800 91,278 92000150004 9136701 31-Mar-96 CALAUSTRO60 106,719 133,284 143,680 156,401 175,117 164,603 92000150007 9136701 31-Mar-96 MOTEN72 59,905 72,815 54,998 53,939 53,964 53,964 92000151565 9136701 31-Mar-96 HSIU84 142,275 134,777 147,737 163,401 174,541 184,517 CHC80075988 9122400 05-Mar-92 WOODWARD96 166,101 209,869 297,819 313,195 317,093 312,717 CHC80079986 9127301 17-Dec-92 FELICE

108 201,945 331,113 281,977 292,058 334,082 301,073 DTC80024296 9132000 27-Sep-93 WARD120 251,627 477,459 663,460 878,375 881,339 899,644 DWC80044236 9118700 30-Jan-91 HOLMES132 628,634 1,006,108 1,328,028 1,271,552 1,375,665 1,386,551 DWC80053253 9127301 15-Oct-92 BOUDREAUX144 189,635 562,379 513,080 971,194 631,993 616,112 EHB80000045 9132000 18-Nov-93 ENDRESS156 409,030 609,724 860,491 918,760 1,068,932 EHB80000208 9132000 23-Feb-94 DRAPER168 384,084 723,390 718,359 867,886 EHB80000330 9136600 04-May-94 SHEHAB180 576,467 641,546 920,947 EHB80000462 9136600 18-Jul-94 GRESKO192 563,677 755,771 EHB80000592 9136600 09-Sep-94 DEMAREST204 412,213 EHB80000610 9136600 26-Sep-94 PETTINATO

1982 1983 1984 Data Total EHB80000610 9136600 26-Sep-94 PETTINATO### 46293 46545 Count of 1984 1 EHB80000610 9136600 26-Sep-94 PETTINATO

Average of 1985 54194 EHB80000610 9136600 26-Sep-94 PETTINATOSum of 1986 83087 EHB80000610 9136600 26-Sep-94 PETTINATOCount of 1986 1 EHB80000610 9136600 26-Sep-94 PETTINATOProduct of 1987 83693 EHB80000610 9136600 26-Sep-94 PETTINATO

46293 Count of 1984 1 EHB80000610 9136600 26-Sep-94 PETTINATO46293 Average of 1985 54194 EHB80000610 9136600 26-Sep-94 PETTINATO46293 Sum of 1986 83087 EHB80000610 9136600 26-Sep-94 PETTINATO46293 Count of 1986 1 LRC80008694 9132001 13-Sep-93 FURR46293 Product of 1987 83693 NMU80041038 9127300 17-Dec-92 TOBIN

43,505 Count of 1984 1 NMU80042134 9127300 17-Mar-93 FERRARA43,505 Average of 1985 54194 OLC80043415 9118700 04-Mar-91 BLACKKETTER43,505 Sum of 1986 83087 OLC80043416 9118700 04-Mar-91 JANSTO43,505 Count of 1986 1 OLC80046551 9122400 22-Oct-91 MCKENZIE43,505 Product of 1987 83693 OLC80047944 9122400 05-Mar-92 VANBIBBER### 58227 50808 Count of 1984 1 OLC80048849 9127301 27-May-92 OAKES

Average of 1985 48731 ORB80049013 9122400 14-Feb-92 ZEHDARSum of 1986 69045 PHU80042333 9122400 25-Oct-91 SUKEENACount of 1986 1 PHU80048800 9132000 26-Apr-93 MURPHYProduct of 1987 69319 PHU80050845 9132000 06-Oct-93 BATHAVIC

58227 Count of 1984 1 PTU80020114 9122400 29-May-91 RAE58227 Average of 1985 48731 PTU80023538 9127300 29-May-92 LEWIS58227 Sum of 1986 69045 PTU80024011 9127300 21-Jul-92 MCGREGOR58227 Count of 1986 1 PTU80024257 9127300 21-Aug-92 MCKENDRY58227 Product of 1987 69319 SCB80023092 9118700 01-Oct-90 DENTON

44,255 Count of 1984 1 SCB80024171 9118700 01-Jun-90 GILL44,255 Average of 1985 48731 SCB80030473 9127300 12-May-92 VALLEJOS44,255 Sum of 1986 69045 SCB80034879 9127300 02-Nov-92 STOIAN44,255 Count of 1986 1 SCB80040552 9132000 07-Oct-93 DUNCAN44,255 Product of 1987 69319 SUB80022334 9132001 03-Jun-93 CARLSON### 72815 54998 Count of 1984 1 SUB80024203 9136601 27-Apr-94 WILKENS

Average of 1985 53939 SUB80025057 9136600 28-Jul-94 OTTOSum of 1986 53964 SUB80025527 9136601 15-Sep-94 LEHNINGCount of 1986 1 SUB80029039 9136701 12-Aug-95 RANDOLPHProduct of 1987 53964 SUB80029709 9136700 11-Oct-95 BARNHART

72815 Count of 1984 1 SYU80021841 9122400 08-Jul-91 GRIFFIN72815 Average of 1985 53939 SYU80027254 9127300 09-Feb-93 ROCHEFORT72815 Sum of 1986 53964 SYU80028015 9132000 05-Apr-93 DEMAREST72815 Count of 1986 1 THB80000337 9136601 19-May-94 HALEY72815 Product of 1987 53964 THB80000378 9136601 06-Jun-94 MORTON

59,905 Count of 1984 1 THB80000766 9136601 04-Nov-94 CASEY59,905 Average of 1985 53939 THB80001146 9136701 14-Jun-95 SONNIER59,905 Sum of 1986 53964 THB80001662 9136701 09-Dec-95 SIMPSON59,905 Count of 1986 1 THB80001898 9136701 26-Jan-96 WHITE59,905 Product of 1987 53964 WHB80000108 9127300 17-Oct-92 LOWRY### 69303 70787 Count of 1984 1 WHB80000160 9136600 27-Jun-94 HOYE

Average of 1985 71365 WHB80000181 9136600 08-Jul-94 JONESSum of 1986 71071 WHB80000263 9136600 16-Oct-94 AMREINCount of 1986 1 WHB80000324 9132000 01-Jul-93 VIOLETTE

GL TREND ANALYSIS Page 2 of 27

Quiet Please. Exam in Progress.

Although Mr. Ferguson is clearly a buffoon most of the time, he did ask at least one pertinent question that Nerdly should have been prepared to answer. Which of the following questions are we talking about?

I. What are you wearing there, boy?

a. I and IIb. I and IIIc. II and IIId. all of the abovee. none of the above

II. How does this affect my bottom line?

III. Are you familiar with the Sharper Image Nose Hair Trimmer?

Quiet Please. Exam in Progress.Which of the following questions are we talking about?

I. What are you wearing there, boy?

II. How does this affect my bottom line?

III. Are you familiar with the Sharper Image Nose Hair Trimmer?

a. I and II

Correct Answer...

Which of the following are good preparation steps before an important presentation?

I. Asking your boss to attend important meetings as back-up support.

a. I onlyb. II onlyc. III onlyd. all of the abovee. none of the above

II. Staying up all night revising and printing exhibits.

III. Drinking five cups of coffee.

Quiet Please. Exam in Progress.Which of the following are good preparation steps before an important presentation?

I. Letting your boss know what you'll be presenting to the CFO tomorrow.

II. Staying up all night revising and printing exhibits.

III. Drinking five cups of coffee.

a. I only

Correct Answer...

Donna Wannabe had a right to be upset about which of the following:

I. Nerdly dressing like a leprechaun

a. I and IIb. I and IIIc. II and IIId. all of the abovee. none of the above

II. Nerdly changing his analysis without informing Donna before the meeting

III. Ferguson being a buffoon

Quiet Please. Exam in Progress.Donna Wannabe had a right to be upset about which of the following:

I. Nerdly dressing like a leprechaun

II. Nerdly changing his analysis without informing Donna before the meeting

III. Ferguson being a buffoon

a. I and II

Correct Answer...

November 15, 1996

Arnold Nerdly, ACAS

Assistant Actuary

CAS Spring MeetingSan Diego, CAMay 21, 2002

EXHIBIT 1

SHARKI AUTOMOTIVE EMPIRE - OVERALL LOSS RATIOS

(1) (2) (3) (4) (5) (6) (7) (8)

PD INC INC/IBNER INC/IBNR INC/IBLAL INC/IBLA INC/BLAHLOSS LOSS LOSS LOSS LOSS LOSS LOSS

ACC-YEAR RATIO* RATIO** RATIO*** RATIO**** RATIO***** RATIO****** RATIO******

1999 66.0% 79.0% 81.0% 83.0% 90.0% 94.0% 99.0%

2000 51.0% 58.0% 80.0% 85.0% 94.0% 97.0% 102.0%

2001 33.0% 62.0% 83.0% 94.0% 97.0% 100.0% 105.0%

TOTAL 48.0% 82.0% 81.0% 90.0% 94.0% 97.0% 102.0%

* Paid losses only

** Paid plus case incurred losses

*** Paid plus case incurred plus IBNER losses

**** Paid plus case incurred plus IBNR losses

***** Paid plus case incurred plus IBNR losses plus Allocated Loss Adjustment Expense

****** Paid plus case incurred losses plus IBNR plus ALAE and ULAE

******* Paid plus case incurred losses plus IBNR plus all LAE plus are you really reading this?

EXHIBIT 2

SHARKI AUTOMOTIVE EMPIRE - WORKERS COMP LOSS RATIOS

(1) (2) (3) (4) (5) (6) (7) (8)

PD INC INC/IBNER INC/IBNR INC/IBLAL INC/IBLA INC/BLAHLOSS LOSS LOSS LOSS LOSS LOSS LOSS

ACC-YEAR RATIO* RATIO** RATIO*** RATIO**** RATIO***** RATIO****** RATIO******

1999 81.0% 85.0% 85.0% 90.0% 98.0% 102.0% 111.0%

2000 62.0% 69.0% 88.0% 93.0% 99.0% 109.0% 118.0%

2001 40.0% 70.0% 90.0% 95.0% 104.0% 115.0% 120.0%

TOTAL 60.0% 73.0% 87.0% 93.0% 100.0% 108.0% 116.0%

* Paid losses only

** Paid plus case incurred losses

*** Paid plus case incurred plus IBNER losses

**** Paid plus case incurred plus IBNR losses

***** Paid plus case incurred plus IBNR losses plus Allocated Loss Adjustment Expense

****** Paid plus case incurred losses plus IBNR plus ALAE and ULAE

******* Paid plus case incurred losses plus IBNR plus all LAE plus are you really reading this?

Quiet Please. Exam in Progress.

While presenting his analysis to Sharki, Nerdly misses at least one good opportunity to:

I. Educate Mr. Sharki on some recent developments in pricing theory

a. I onlyb. II onlyc. III onlyd. I and IIIe. all of the above

II. Return the conversation to its main subject - Sharki’s renewal price

III. Dump his Volvo for a better car

Quiet Please. Exam in Progress.While presenting his analysis to Sharki, Nerdly misses at least one good opportunity to:

I. Educate Mr. Sharki on some recent developments in pricing theory

II. Return the conversation to its main subject - Sharki’s renewal price

III. Dump his Volvo for a better car

b. II only

Correct Answer...

In retrospect, Nerdly should have expected his exhibits of loss ratios to be:

I. Defended tooth and nail by Ms. Wannabe

a. I and IIb. I and IIIc. II and IIId. all of the abovee. none of the above

II. Too detailed and busy for a client to follow easily

III. Discarded by Sharki at the first opportunity

Quiet Please. Exam in Progress.Nerdly should have expected his exhibits of loss ratios to be:

I. Defended tooth and nail by Ms. Wannabe

II. Too detailed and busy for a client to follow easily

III. Discarded by Sharki at the first opportunity

c. II and III

Correct Answer...

Which of the following are not not false?

I. A guy like Sharki won’t listen to anyone or anything

a. I and IIb. I and IIIc. II and IIId. all of the abovee. none of the above

II. Nerdly’s “stupid people” joke is a good way to break the ice with a stranger

III. Nerdly never had control of this meeting

Quiet Please. Exam in Progress.Which of the following are not not false?

I. A guy like Sharki won’t listen to anyone or anything

II. Nerdly’s “stupid people” joke is a good way to break the ice with a stranger

III. Nerdly never had control of this meeting

a. I and II

Correct Answer...

May 21, 2002

Arnold Nerdly, FCAS, MAAA

Vice President & Consultant

CAS Spring MeetingSan Diego, CAMay 21, 2002

Products Liability

$0$5,000

$10,000$15,000$20,000

Probability

Loss

es

Expected Losses by Coverage

$0$10,000$20,000$30,000$40,000$50,000

10% 25% 40% 45% 50% 55% 60% 75% 90%

Probability

Loss

es

PL B'even (PL) GL

B'even (GL) AL B'even (PL)

Total B'even (Total) Total ex AL

B'even (Total ex AL)

Quiet Please. Exam in Progress.

Nerdly’s explanation of natural logarithms:

I. Clearly establishes his mathematical prowess, thus lending authority to the entire Captives study.

a. I onlyb. II onlyc. III onlyd. II and IIIe. all of the above

II. Is a blatant slap in the face to those of us who prefer curvy lines.

III. Is an unwelcome and unwise digression.

Quiet Please. Exam in Progress.Nerdly’s explanation of natural logarithms:

I. Clearly establishes his mathematical prowess, thus lending authority to the entire Captives study.

II. Is a blatant slap in the face to those of us who prefer curvy lines.

III. Is an unwelcome and unwise digression.

d. II and III

Correct Answer...

Which of the following are not not not false?

I. Nerdly should be more honest about what he does & does not know

a. I and IIb. I and IIIc. II and IIId. all of the abovee. none of the above

II. A rent-a-captive is not equivalent to borrowing a table for a party

III. Chip’s Uncle Miltie refers to him as “that snotty little Williams boy”

Quiet Please. Exam in Progress.Which of the following are not not not false?

I. Nerdly should be more honest about what he does & does not know

II. A rent-a-captive is not equivalent to borrowing a table for a party

III. You will definitely not learn everything you need to know about captives by attending concurrent sessions at CAS meetings, not.

a. I and II

Correct Answer...

Which of the following are true?

I. There is no substitute for good preparation

a. I onlyb. (I or not II) and [ (I and III) or not III ]c. (II and not III) or (not II and not I)d. (I or III) and [ not II and not (I and III) ]e. IV, had there been a IV to chose from

II. There is no substitute for an M B A

III. It is critical to know your audience

Must Think ! Must be smart !

I. There is no substitute for good preparation

II. There is no substitute for an M B A

III. It is critical to know your audience

a. I onlyb. (I or not II) and [ (I and III) or not III ]c. (II and not III) or (not II and not I)d. (I or III) and [ not II and not (I and III) ]e. IV, had there been a IV to chose from

Jeopardy Think Music.mp3

Quiet Please. Exam in Progress.Which of the following are true?

I. There is no substitute for good preparation

II. There is no substitute for an M B A

III. It is critical to know your audience

b. (I or not II) and [ (I and III) or not III ]

Correct Answer...

Can We Talk ? Rose D. BarrettMartin T. KingRichard O. KirsteMark Priven

CAS Spring MeetingSan Diego, CAMay 21, 2002