Gerald B. Farlow & Associates, Ltd.

In the last few years, the credit insurance and extended service contract industry has experienced unprecedented changes. Insurance executives today face the challenge of increasing or retaining market share in a complicated environment. This environment results from the interaction of changing consumer needs, increased competition, varying state regulations, and significant changes in federal income tax statutes. Many companies have turned to greater use of producer owned reinsurance programs to meet this challenge. Still, this innovative approach to the sale of credit insurance and extended service contracts introduces its own set of unique problems into an already complex situation. Poor design or ineffective administration of a reinsurance program can reduce a company's profits. They also can impede the company's effort to increase its share of the credit insurance and extended service contract market.

As an independent consulting firm, our goal is to provide a full range of professional services to maximize profit and increase the market share of our clients in times of increased competition. Our experience and accomplishments in the insurance industry have supported our conviction that these activities lend themselves to systematic planning and control. We specialize in applying mathematical and management science techniques to solve business problems and to evaluate alternatives.

With our unique blend of actuarial, marketing and management experience and capabilities, we are well positioned to help today's insurance industry leaders cope with an increasingly complex business environment. On this basis, we provide the following services to help our client companies effectively implement and manage existing resources, and to facilitate a planned transition to the future.

Reinsurance Program Design

We will help you set up an effective reinsurance program by identifying the profit and market share goals of the program. We will then design the program features needed to attain these goals, and identify ways to make the program attractive to existing and prospective credit and extended service contract insurance producers.

Domicile Evaluation and Selection

We will help select the domicile for formation of your producer owned insurance companies. There are several attractive locations to consider. The differences in regulatory requirements make selection of the most suitable domicile for these companies a formidable challenge to even the most experienced insurance professionals.

Formation of Reinsurance Companies

When one of your producers chooses to form an insurance company, we will handle the organizational details for you in the selected domicile.

Requirements Analysis

Perhaps the most important activity in development of a reinsurance marketing program is deciding exactly what business requirements the new program must satisfy. Because of our unique combination of marketing, actuarial and management backgrounds, we can stimulate communication and cooperation between your marketing and administrative personnel. This produces a clearer understanding of the program goals and the responsibilities of each group.

Reinsurance Program Reviews

We will conduct a thorough review of an existing reinsurance program to compare it against the original needs and objectives. We will concentrate on how well the program meets your current needs, and how well it can adapt to changes and future growth. This kind of review can produce significant savings in time, frustration and dollars for your company.

Reinsurance Program Support

We will provide the following services in support of your reinsurance program:

Marketing Support

We are available to support your credit insurance and extended service contract marketing efforts by:

Explaining your reinsurance program to prospective participants.
Preparing pro forma illustrations of profit for prospective participants.
Communicating information about changes in laws and regulations that can affect your insurance company or those of your producers.
Answering questions your marketing representatives or your producers may have regarding reinsurance.
Meeting with accountants and advisors that represent your clients to answer the complex technical questions that they may pose.
Developing marketing material that describes the prominent features of your reinsurance program.
Conducting reinsurance seminars for your marketing representatives, for producer groups and for industry organizations.

Administrative Support

Our administrative support services will make the operation of your reinsurance program as trouble-free as possible. Some administrative support services we offer your company are:

Tax Planning - We will conduct a thorough review of each producer owned insurance company's unique situation. This is necessary to appreciate fully the impact of the insurance company tax provisions of The Internal Revenue Code on its tax liability. Because of the scope of recent changes in life insurance company taxation, tax planning strategies for these companies should be reviewed annually. We will meet with your producers to discuss the tax advantages enjoyed by insurance companies, and to identify possible tax planning opportunities.
Financial Reporting Services - A statutory annual statement must be prepared for each producer owned insurance company. We have many years of experience in preparing insurance company annual statements, and will help your producer owned companies in this effort.
Tax Return Preparation - We will prepare your producer owned insurance companies' United States income tax returns. We will monitor the tax status of these companies to ensure that they retain the benefits of small life or casualty insurance company tax treatment.
Management Information Reporting - We will periodically review with you our interpretation of your production and loss ratio trends. We also will discuss with you our ideas and suggestions for increasing your insurance production and for maximizing your insurance profits.
Ceding Statement Preparation - We will prepare reinsurance statements for your producer owned insurance companies. These statements reflect the net premiums ceded, ceding commissions paid, losses and loss expenses incurred, loss reserves, premiums due and unpaid, and policy reserves required on insurance in force at the end of the reporting period.
Reinsurance Contract Preparation - We will prepare the Premium Warehousing Agreements, Reinsurance Treaties, and Trust/Custodial Agreements required for your reinsurance program.

Other Services

Other ways in which we can be of service to your company include:

Providing an objective opinion on major insurance industry management issues.
Assistance in evaluating the impact of state and Federal legislative changes at the time they are proposed or after they are enacted.
Advice on credit insurance and extended service contract marketing and administration methods.
Assistance in formulating long range credit insurance and extended service contract marketing objectives and developing strategies to attain them.
Development of written administrative procedures for reporting premiums, claims, etc.
Assistance in drafting required applications and notifications to the Federal Reserve Board for an insurance company that will be owned by national bank.
Assistance in evaluating reports and proposals from computer hardware and software vendors.

Our specialized management consulting services are available to ensure that your reinsurance program is effectively supporting your corporate objectives. We have considerable experience in applying these services to large and small companies. We have developed methods for dealing with administrative, marketing and reinsurance activities ranging from the simplest to the most sophisticated. Specific projects may involve only a few days of intensive effort, or several months of planning and implementation assistance. This depends on the nature of the problem and the level of assistance needed. We carefully plan with each client in advance exactly what is to be done, how best to do it, how long it will take, and how much it will cost. Our fees are fair and competitive.