Due Diligence for a Transfer of Engagements – Presenter: Gary Morley.

Due Diligence for a Transfer of

Engagements –

Presenter: Gary Morley

What is it?

The process by a buyer investigating a target to find out

EXACTLY what he is buying, its value and risks

What is it not?

A fishing expedition

Steps to protect both parties

Why do it?

No warranties available

Who does it?

Acquirer with help of professional advisors

Actuary

Legal

Finance/accountant

Compliance

Information Technology (IT)

Internal & External Auditors

Areas of enquiry?

Actuary:

Solvency position – transferee & combined firms

Valuation assumptions

Expenses - transferee & combined firms

Products of transferee – associated risks

Policy management systems – integration challenges

Solvency II – impact & associated costs

Legal:

Employment; TUPE

Litigation

Intellectual property/IT

Property ownership

Contracts (outsourcing)

Constitution

Insurance

Other areas

Finance/accountant:

Accuracy of accounts

Assumptions / basis of valuations

Returns to FSA / HMRC

Trading subsidiaries

Assumptions relating to marketing

Tax issues

Compliance:

Systems & Controls – Compliance Plan, ML &

Financial Crime, TCF, MI, Corporate Governance,

Outsourcing, Financial Promotions etc…

Regulatory Status & Relationships..

Business standards

Enforcement action

Persistency / Cancellation

Information Technology (IT):

Stability of IT policyholder systems

Third party IT providers

Internal Auditors:

Appropriateness of the firms internal function/strategy

and risk management framework, and any risks that

may arise from the approach taken

External Auditors:

Financial controls environment

Accounting policies & balance sheet

Solvency position

Planning assumptions within ‘Financial Conditions

Report’ (FCR)

Outsourcing relationships

Unit pricing

Tax

Land & building

Investments

Returns to FSA / HMRC

Valuations

Solvency II

Problems:

Not knowing the unknown

Timescales

Board involvement & sign-off