Statement of Actuarial Opinion (SAO)

Statements of actuarial opinion are being increasingly scrutinized by regulators and auditors. Over the past few years there has been a significant expansion in the scope of information that must be addressed in the SAO. Among the items in the expansion include:

• A very strong continuing education requirement – actuaries that were previously “qualified” to issue an SAO may no longer be qualified if they have not maintained this requirement.
• Comment on “new or unusual exposures” (e.g. the effect of economic conditions, housing market, swine flu, etc.) – actuaries must attempt to quantify the effect of these exposures if material.

• A paragraph discussing any risks to “material adverse deviation”– the actuary must discuss whether or not the risk exists, the dollar amount that would be considered material, as well as the possible causes of such a deviation.
• A discussion of “unusual” values on IRIS ratios #9, #10, #11 – these ratios relate to loss reserve development.
• An exhibit that ties the values in the actuarial analysis and opinion to the values contained in the annual statement.
• A discussion of the changes in the actuarial result from the prior year.
• A discussion of the actuary’s range of reasonable estimates the actuary is also required to calculate the difference between the reserve carried by the company and the estimates provided by the actuary.

Many actuaries providing an SAO do not meet all of these requirements. We always do.

Our tagline is “Complex Calculations Made Easy to Understand”. We know that it is not enough to provide accurate, sound results. We must also make them understandable. If results are not understandable, business executives will find it difficult to share with other key stakeholders. Our analyses are easy to understand and can be used by clients to directly impact their bottom line.