Agenda

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(No Transcript)
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Agenda

• Review of topics
• Class structure
• 
  INTERACT
• Take-aways
• Industry facts
• Little fun

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Our Valuable Teachers

• Steve England AIG, Resident Vice President
• Mitch Harless AIG, Vice President Global
  Energy Claims
• Donna Pettersen McGinnis Consultant for DO at
  Dynegy
• Cindy Chapman Apache, Corporate Risk Manager
• Robert D. Stauffer President , OIL           
• O.J. Sanchez Principal,Decision Strategies
• James Hughes Director of Corporate Risk
  Management ConocoPhillips           
  
• James Ferguson Assoc. Gen Council and Director
  of Risk Management, Halliburton
• Ted Gobillot Assoc. General Council, Rowan
• Bob Hixon Managing Director, John L. Wortham
  Son

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Class Structure

• How did we learn from this class?
• Real-life experience of lecturers
• Interaction through QA
• Constant commitment through written assignments
• Reinforcement of knowledge through presentations
• Practice of team working

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How else could we have learned?

• No way! This was the best way!
• No way! This was the best way!
• No way! This was the best way!
• No way! This was the best way!
• No way! This was the best way!
• No way! This was the best way!
• No way! This was the best way!
• No way! This was the best way!
• No way! This was the best way!?
• Any other ideas?

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Take-Aways

• What did we learn from the class?
• Concepts from the energy industry
• Fundamentals in the oil and gas sector
• Cyclicality of commodity prices
• The magnitude of the operations
• Notions of risk and how to insure and manage that
  risk
• Impact of natural catastrophic events
• Risk management is both an art and a science

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Cyclicality
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Gasoline Prices
Source U.S. Bureau of Labor Statistics
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Earth by Night

• Source NASA (Nov 2000)

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Earth by Night
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Insured Loss Claim Count for Major Storms of
2005
Hurricanes Katrina, Rita, Wilma Dennis produced
a record 3.2 million claims
Property and business interruption losses only.
Excludes offshore energy marine losses. Source
ISO/PCS as of February 8, 2006 Insurance
Information Institute.
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Outlook for 2006 US Hurricane Season
Average 2005 2006F
Named Storms 9.6 26 17
Named Storm Days 49.1 115.5 85
Hurricanes 5.9 14 9
Hurricane Days 24.5 47.5 45
Intense Hurricanes 2.3 7 5
Intense Hurricane Days 2.3 7 5
Net Tropical Cyclone Activity 100 263 195
Average over the period 1950-2000. As of
December 4, 2005. Source Dr. William Gray,
Colorado State University, December 6, 2005.
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Top 10 Most Costly Hurricanes in US History,
(Insured Losses, 2005)
Seven of the 10 most expensive hurricanes in US
history occurred in the 14 months from Aug. 2004
Oct. 2005 Katrina, Rita, Wilma, Charley, Ivan,
Frances Jeanne
Sources ISO/PCS Insurance Information
Institute.
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Global Insured CAT Losses, 19702005(Property
and Business Interruption)
Billion USD, at 2004 prices
There has been a huge increase in the insured
value of global CAT losses in recent years
Record 78 billion in insured natural CAT losses
in 2005, compared to 5B in man-made disasters
Source Swiss Re, sigma No. 1/2005 2/2006.
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Types of Risks

• Financial risk
• Credit risk
• Interest rate risk
• Legal risk
• Liquidity risk
• Market risk
• Reinvestment risk

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Steps in Managing Risk

• Establishing the context
• Identifying
• Assessing
• Treating
• Transfer
• Avoidance
• Reduction (Mitigation)
• Acceptance (Retention)
• Creating the plan
• Implementing
• Reviewing and evaluating

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Types of Insurance

• Health insurance
• Life insurance
• Property insurance
• Casualty insurance
• Credit insurance
• Reinsurance
• Self insurance
• Travel insurance

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Property and Business Interruption Losses
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Did You Know?

• History of transferring of risk
• Smoking is bad! risk and insurance
• KR insurance
• Celebrities insured
• Bruce Springsteen
• Marlene Dietrich
• Fred Astaire
• Tina Turner
• Dolly Parton

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Famous Quotes

• You dont need to pray to God any more when there
  are storms in the sky, but you do have to be
  insured. (Bertold Brecht german poet)
• For almost seventy years the life insurance
  industry has been a smug sacred cow feeding the
  public a steady line of sacred bull. (NYTimes
  Ralph Nader 1974)

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Jokes

• The cowboy was trying to buy an insurance
  policy. The insurance agent was going down the
  list of standard questions.
• "Ever have an accident?"
• "Nope, nary a one.
• "None? You've never had any accidents"
• "Nope. Ain't never had one. Never."
• "That's hard to believe. No accidents at all?
• "Well, rattler bit me one time.
• "Wouldn't you consider that an accident?
• "Hell no. Damned varmint bit me on purpose."

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Class Contest
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• THE END

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Good Luck!