This case involves a group of plaintiffs that allege the defendant (X-Corp) committed securities fraud by misleading investors about the profitability of the company’s core business (insurance) and reported false financial results by understating necessary reserves. The individual Defendants assured investors that they had closely studied all aspects of X-Corp LTC business, and that X-Corp was amply reserved. However, Defendants revealed that the X-Corp was materially under-reserved and that they needed to increase claim reserves by several hundred million dollars. This news severely impacted the health of the entire company, driving them from to a hundred million dollar loss, and further impacting the value of their stock.
Question(s) For Expert Witness
- 1. Please briefly describe your experience as an actuary working with Long-Term Care insurance.
Expert Witness Response E-021581
In the past 18 months my relevant LTC experience is lead participation on the financial examinations of two large LTC insurance carriers. All insurance companies undergo financial examinations by their state regulators every 3 to 5 years. Man, Man & Associates (my actuarial firm) has had a lead actuarial role on the LTC portion of two large carriers. During our work on the examinations, we are testing the statutory reserves of the LTC insurance carriers and gained a very deep understanding of the financial performance of the companies. On one of the two exams we concluded that the company’s reserves were deficient, and the state regulators agreed with our conclusion. On the other exam, we concluded that the company’s reserves were adequate. One thing we do know is that as an industry, many LTC insurance carriers have had reserve deficiencies so its not surprising to me that litigation around such matters has arisen. We do not have any conflicts of interest in such work, and that’s why I feel that with our experience and actuarial qualifications we will be able to provide strong support on such litigation.
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