1. CIA Annual Meeting Assemblée annuelle de l’ICA June 29 & 30, 2006  Les 29 et 30 juin 2006 Ottawa, Ontario GEN-5: Actuary’s Duty to the Public

2. CIA Annual Meeting  Assemblée annuelle de l’ICA Who is the Public? All Canadians Shareowners Members of a pension plan Group policyholders Management of corporations that hire the actuary Board of Directors Conflict between these groups GEN-5: Actuary’s Duty to the Public1

3. CIA Annual Meeting  Assemblée annuelle de l’ICA GEN-5: Actuary’s Duty to the Public2 Pre-SOX Duties Audit of “audit firms” – Done by another one of the Big Four – Results – not public – Findings – very few

4. CIA Annual Meeting  Assemblée annuelle de l’ICA Post-SOX Duties Audit of “audit firms” – CPAB – PCAOB Findings – Many – Public GEN-5: Actuary’s Duty to the Public3

5. CIA Annual Meeting  Assemblée annuelle de l’ICA Code of Ethics Best one: CFA Length Tested on all exams How many CFAs have lost their designation? Committee of Analyst Standards Sell side analysts – Credibility Form vs. Substance GEN-5: Actuary’s Duty to the Public4

6. CIA Annual Meeting  Assemblée annuelle de l’ICA Conflict of Interest Most professional Work is done according to the law Work is done technically well How come on occasion the public loses? Compensation Genesis of accounting scandals PCAOB, CPAB – review compensation Do not lead us into temptation GEN-5: Actuary’s Duty to the Public5

7. CIA Annual Meeting  Assemblée annuelle de l’ICA Recent Examples Marsh MacLellan Marsh-bid rigging Putnam-late trading/market timing Mercer-club of money managers Most actuarial firms Executive compensation Other consulting work Annual reports – audited Press releases – unaudited EBITDA vs. profits Rate of return on income trusts GEN-5: Actuary’s Duty to the Public6

8. CIA Annual Meeting  Assemblée annuelle de l’ICA Recent Examples (Continued …) IPO in June - Value of liabilities increase What is an actuary to do? Enron – Vision and Ethics Sponsorship scandal Options – backdating GEN-5: Actuary’s Duty to the Public7

9. CIA Annual Meeting  Assemblée annuelle de l’ICA Arthur Andersen – “Final Accounting” – Barbara Lay Toffler/J. Reingold Marine corps of accounting profession Purpose – protect the investing public Blue back memo Accounting principles should be fair to: Consumer Labour Management Investors Public GEN-5: Actuary’s Duty to the Public8

10. CIA Annual Meeting  Assemblée annuelle de l’ICA Arthur Andersen (continued …) Resigned all railroad accounts Who did not depreciate rails, ties, etc? 1974 Public Review Board – to monitor the firm’s internal systems The 1990’s: Greed Compensation Rewards individual effort or team? Published for all partners to see Consulting vs. audit GEN-5: Actuary’s Duty to the Public9

11. CIA Annual Meeting  Assemblée annuelle de l’ICA CIA – 2006 Response Independent standard-setting process Actuarial standards oversight council Members mainly non-actuaries GEN-5: Actuary’s Duty to the Public10