Armed with the DFA results, the CEO of Falcon is ready to move on to negotiation stage of the acquisition with the knowledge that his holistic approach to insurance company management can produce a better, more efficient DFAIC. However, the competitive advantage of a holistic approach to insurance company management anticipated by our fictional CEO might be short-lived. The ability to perform holistic analysis through DFA has largely been made possible by the recent advancements in computing power and speed. These advancements, combined with sophisticated DFA models and dedicated DFA professionals, have brought the power of Dynamic Financial Analysis to within reach of all interested property-casualty companies.
One final note: The results of this DFA study, while raising some general insurance industry issues, are specific to the objectives, characteristics and assumptions that we used for DFAIC. DFA is not a trivial endeavor. Even given a good DFA modeling system, the analysis that is performed can be poor. A good DFA analysis will tie the conclusions to the assumptions in a clear and concise manner. The impact of alternative strategic initiatives will be explained in such a way that someone who is unfamiliar with the details of DFA will still be able to follow, understand and ultimately accept the stated conclusions. While the undertaking is not trivial, the potential efficiencies that can be gained through a holistic approach to property-casualty insurance management can be significant to those who are willing to supply the effort.