Dynamic Financial Analysis

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Dynamic Financial Analysis (DFA) is the most advanced modeling process in today's property and casualty industry-allowing you to develop financial forecasts that integrate the variability and interrelationships of critical factors affecting your results. Our DFA models can incorporate your company's unique circumstances, such as marketplace, management philosophy and business operations, to give you a customized range of what if scenarios. The Milliman DFA tools are a series of interrelated models - each geared to perform a specific type of analysis - that can be tailored and applied, either singly or in concert, to a particular business problem.

  • Macroeconomic model: Includes GDP growth, inflation, interest rates, stock returns, dividend yields, and bond default rates, and serves as a basis for generating asset and liability projections in literally thousands of simulated environments.
  • Business portfolio optimizer: Enables you to view your entire company - including both assets and lines of business - as a single portfolio, and provides guidance in selecting business mix strategies.
  • Underwriting scenario generator: Under varying economic scenarios, uses assumptions regarding premium, losses, and expenses on gross and ceded bases to create projections of cash flows and reserves.
  • Investment model: Aggregates cash from all sources, and projects investment returns in line with your investment strategy and risk preferences, arriving at a projection of year-end assets.

How do we put DFA to work for our clients? Here's one example. For a company whose experience for several years was far worse than plan, we determined through the use of modeling techniques that the current-year plan had slightly less than a 50 percent chance of succeeding. Assumptions were off-target in three areas key to profitability. This analysis provided critical information, enabling our client to evaluate alternative courses of action in each area with respect to premium volume, reinsurance, and pricing.

Next Steps

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