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**Effective Financial Planning and Modeling**

Learn about the features, applications, components, and success factors of financial planning models. Develop plans, measure performance, and project financial outcomes to achieve organizational goals.

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**Effective Financial Planning and Modeling**

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  1. CASUALTY ACTUARIAL SOCIETY DYNAMIC FINANCIAL ANALYSIS BUSINESS PLANNING AND FINANCIAL MODELS Carl J. Leo, ACAS, MAAA OMNI Insurance Group

  2. FEATURES OF AN EFFECTIVE PLANNING SYSTEM • Communication Instrument • Coordination Mechanism • Control Device • Motivational Tool • Improved Decision Making • Full and Substantive Involvement

  3. FINANCIAL PLANNING MODELS • A formal statement of expectations regarding sales, expenses and other financial transactions • A planning tool for the coordination, integration and evaluation of segment plans • A control mechanism for measuring performance and variances on critical success factors • Not intended to be an accurate predictor, but a tool for planning

  4. FINANCIAL MODELS - APPLICATIONS • Financial Forecasting and Analysis • Construction of Pro Forma Financial Statements and Results • Development of Operating Plans and Budgets • Evaluation of Performance • Guidance on Strategic and Operational Decision Making • Measuring Risk and Uncertainty • Tax/Investment Planning

  5. FINANCIAL MODELS - COMPONENTS • Financial Variables (e.g. revenue, expense, investment income, cash, taxes) • Input Variables and Performance Variables • Policy Variables (decision/control variables) • Deterministic or Stochastic • Mathematical / Structural Relationships • Input Parameters (e.g. expected loss payout)

  6. FINANCIAL MODELS - SUCCESS FACTORS • Operations well understood by developers • Input data readily accessible • Development and application involves corporate management • Input and output in convenient formats • Understandable, relatively simple • Ample allowance for judgmental inputs • Reasonably validated • Well documented • Can be flexibly updated or modified

  7. OBJECTIVES & GOALS REVIEW & EVAL DEVELOP PLANS REVIEW & EVAL EXECUTE PLANS MEASURE PERFORMANCE REVIEW & EVAL

  8. SALES / PREMIUM PROJECTION INCURRED LOSS PROJECTION KNOWN / PLANNED CHANGES EXPENSE PROJECTION CASH FLOW PROJECTION INVESTMENT INCOME PROJECTION INITIAL PRO FORMA FINANCIALS

  9. PLANS & INTENDED ACTIONS PREM , LOSS EXPENSE, INV INC PROJECTIONS INITIAL PRO FORMA FINANCIALS PREMIUM / REVENUE PLAN EARNED PREM UNEARNED PREM PREM RECEIPTS INCURRED LOSS PAID LOSS LOSS RESERVES EXPENSE BUDGET INVESTMENT INCOME OPERATING PLAN FINANCIALS

  10. ABC INS CO - PROJECTED WRITTEN POLICIES

  11. ABC INS CO - PROJECTED WRITTEN PREMIUM

  12. ABC INS CO - PROJECTED LOSS RATIOS

  13. ABC INS CO - PROJECTED EXPENSES

  14. ABC INS CO - PROJECTED CASH FLOW

  15. ABC INS CO - PROJECTED INVESTMENT INCOME

  16. ABC INS CO - PROJECTED BALANCE SHEET

  17. ABC INS CO - PROJECTED INCOME STATEMENT

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