Every year, we update the Memorandum to the Actuary pursuant to Section 667.(2) of the Insurance Companies Act. The Memorandum to the Actuary can be found on the OSFI website in English at:

http://www.osfi-bsif.gc.ca/eng/publications/guidance/index_financial.asp#Memorandum_to_the_Actuary

and French at:

http://www.osfi-bsif.gc.ca/fra/publications/orientation/index_financiers.asp#Note_actuaire

This year's Memorandum has undergone extensive changes compared to the previous year's version. Some important changes are:

• A more standardized reporting format
• The report should target the Relationship Manager as the first reader
• More reporting of asset segment data and its linkage to policy liabilities
• Product line and asset segment reporting should be consistent with internal reporting
• More emphasis on key risks
• More emphasis on expected experience assumptions
• DCAT information is not required
• Less details needed for assumption tables
• More actual/expected analysis
• More analysis data for three years

Given the extensive changes, it may be difficult for actuaries to supply some of the required data covering a three-year period (the current year and the two preceding years). Where past years' data is not readily available, an additional year's data can be added in each of the next two years (i.e. in the actuary's reports for 2003 and 2004). The Memorandum notes where this transitional reporting is allowed.

A calculation of negative reserves is still required for MCCSR reporting this year. For companies that have converted to a full CALM valuation, the allocation method in the fall letter from CLIFR should be followed. For those companies that retain the use of a seriatim calculation system (as an approximation to CALM) for year end reporting, a seriatim calculation of negative reserves is still required.

Actuaries are reminded that they should pay special attention to the current low interest rate environment in setting valuation assumptions and DCAT scenarios.

Two paper copies of the Appointed Actuary's Report should be submitted to OSFI's Accounting and Financial Information Division in Ottawa. We also expect that the report be filed in electronic form using any of a diskette, a CD or by use of an E-mail.

Should you have any questions, please do not hesitate to contact Helmut Engels at 416-973-8934, or at helmut.engels@osfi-bsif.gc.ca.

A hard copy of this Memorandum can be obtained upon request; please send your request to Daniela Susi at 416-973-1668, by fax to 416-952-0664 or at dsusi@osfi-bsif.gc.ca.