Edgewater Ranzal Today’s Presentation for Dec 13, 2011 Mike Killeen Vice President Edgewater Ranzal London, UK Solvency II Webinar Product Fund Accounting & Reporting
Sep 13, 2014
Edgewater Ranzal
Today’s Presentation
for
Dec 13, 2011
Mike Killeen
Vice President
Edgewater Ranzal
London, UK
Solvency II Webinar
Product Fund Accounting &
Reporting
Edgewater Ranzal
Today’s Presentation
for
Dec 13, 2011
Mike Killeen
Vice President
Edgewater Ranzal
London, UK
Solvency II Webinar
Product Fund Accounting &
Reporting
Slide 3
Business Background
Agenda
Closing
Solution Overview
Introductions
Solvency II Overview
Product Fund Accounting Workflow
Deep Dive on Expense Allocations
Technology Overview
Practical Example
Q&A
Slide 4
Focus
Services
People
Methodology
Customers
Partnership
About Edgewater Ranzal
15 Years
700+ clients
1000+ projects
Slide 5
Financial Performance
Legal, Segment &
Mgmt Reporting
Financial Close
HFM Optimization
Performance Lab
Sarbanes Oxley
Compliance Support
Dashboards &
Scorecards
Profitability & Cost Mgmt
Fin Analytics & Reptg
Operational Analytics
What-if Analysis
Query & Reporting
Visual Exploration
Planning
Budgeting
Forecasting
Workforce Planning
Capital Planning
Project Planning
Campaign Planning
Strategic Finance
Our Services
Consolidation BI & Analytics Planning
Financial Performance
Legal, Segment &
Mgmt Reporting
Financial Close
HFM Optimization
Performance Lab
Sarbanes Oxley
Compliance Support
Data Integration
Financial Data Quality
Management
Data Warehousing
Master Data Management
ETL Services
Performance Tuning
Automation
Project/Program Mgmt
EPM Road Maps
Application Reviews
Business Requirements
Process Change
Customer Training
Documentation
Installation
Upgrades
Migration
System Monitoring
Backup and Recovery
Disaster Recovery
Load Testing
Hardware Sizing
Data Services Project Management Infrastructure
Slide 6
Business Background
Slide 7
Solvency II Overview
• What is Solvency II?
– Updated set of Regulatory Requirements for Insurance Firms that Operate in the European Union that is now targeted for Jan 1, 2014
– Focus is on establishing a consistent way on measuring risk and maintaining adequate capital requirements across the European Insurance market place
– Quantitative Impact Study 5 (QIS5) provides the most recent basis for content as insurers prepare
• Pillars of Solvency II
– Pillar 1 – Quantitative Requirements
• Market Balance Sheet & Calculation of Technical Provisions
• MCR/SCR – Minimum/Solvency Capital Requirements
– Pillar 2 – Qualitative Requirements & Supervisor Review
• ORSA – Own Risk & Solvency Assessment
• Policies, Processes & Procedures
– Pillar 3 – Reporting, Disclosures & Transparency
• SFCR (Public) – Solvency Financial Condition Report
• RSR (Private) – Regulatory Supervisor Report
• QRT – Quantitative Reporting Templates
Slide 8
Service
Delivery
Model
Governance
and
Integration
Framework
Organizational
Model Process Model
Technology
and Data
Architecture
The Service Delivery Model describes
the principles of service delivery to the
internal and external customers of the
Finance function.
The Governance and Integration
Framework describes the principles of
governance for each component, and
the integration of governance in the
Finance function.
The Organizational Model describes how
the function is structured, and people’s
roles and accountabilities.
The Process Model determines the
requirements for the design,
development and implementation of
optimal processes.
The Technology and Data Architecture
describes how technology and data
support the end-to-end processes.
SII Impacts People, Process & Technology across
Finance, Technology & Management
Slide 9
Key Processes in the Finance Function
• Core Finance Processes
– Sub-Ledger Accounting
• Manage Accounts Payable
• Manage Accounts Receivable
• Perform Investment Account
– Manage General Accounting
– Insurance Specific Accounting
• Perform Product Fund Accounting
• Product Actuarial Results
– Product Financial Results & Commentary
• Supporting Financial Processes
– Manage Performance
– Perform Planning & Forecasting
– Mange Risk
– Manage Tax
– Stakeholder & Internal Management
Slide 10
What is Product Fund Accounting?
• Product Fund Accounting is the process of producing a complete asset build per up product fund as well as an accurate split per product fund within a specified period.
• Product Fund Accounting Typically Involves the Following Key Types of Activities
– Sourcing & Cleansing of Data
– Adjusting Data for various accounting/regulatory standards
– Allocating Data
– Reporting & Analysis of Data
• The Product Fund Assignment process supports regulatory, statutory, managerial, and actuarial reporting at various levels.
– Management – Determine Profitability By Product for decisions
– Regulatory – Provide inputs to Risk Engines & Tax Reporting
– Statutory – Identify profitability by Segment
– Actuarial – provide top down comparison points for valuations
Slide 11
Product Fund Accounting – Fund Flows
• Fund Inflows
– Premiums
– Annuity Considerations
– Investment Income
– Investment Gains (Realized/Unrealized)
• Fund Outflows
– Benefits Paid
– Management Fees & Expenses
– Commissions & Other Acquisition Costs
– Investment Losses
Slide 12
Product Fund Accounting – Other Key Elements
• Line of Business View
– Health
– Life
– Non-Life
• Contract
– Investment Mandate
• Linked
• Non-Linked
– Duration
– Cash Inflow/Outflow Rules
• Fund & Tax View
– Policy Holder
• Taxed
• Untaxed
– Share Holder
Slide 13
Typical Challenges in Process
• Legacy Policy Admin Systems may have incomplete or inaccurate financial information
• Many elements of the process are not tracked by product fund in the source systems, requiring allocations whose methodologies are inconsistent and not easily understood
• Different User Communities (Finance, Tax, Actuary) may use different sources of data for the various elements within the process, creating discrepancies among the results and leading to reconciliation issues
• The processes can be complex and difficult to explain to an external regulator or senior management
Slide 14
Typical Steps in Product Fund Accounting Process
• Prepare Inputs to Process
– Extract, Cleanse & Load Financial Account Balances & Driver Files
– Prepare Hierarchies & COA Segment Values
– Define Allocation Rules & Global Assumptions
• Perform Allocations for inflows/outflows to product funds
– Allocate Premium & Benefits from Undefined Products
– Allocate Other Balance Sheet Items Relating to Undefined Products
– Allocate Income & Expense from Undefined Products
– Allocate Management Expenses by Client Process (Acq/Maint/1x)
– Allocate Infrastructure Assets & Returns to Product Funds
– Allocate Investment Returns to Product Funds
• Calculate Notional Interest, Levies & Capital Gains Tax
• Generate Product Fund Reports for Statutory/Regulatory/Management
Slide 15
Consistent Challenge Across Industries:
Indirect Expenses Assignment to Products & LOBs
No Standard Process
Standard,
accepted
process
Indirect
Costs are
difficult to
track and
measure
Slide 16
Solution Elements
Slide 17
OLTP & ODS Systems
PeopleSoft HR SAP, Oracle, Siebel, PeopleSoft, Custom
Business Process
OLAP Excel XML
Oracle EPM Platform Components
COMMON REPORTING WORKSPACE
EXCEL AD HOC
FINANCIAL REPTG
DASH- BOARDS
OFFICE INTEGRATION
COMMON INTEGRATION FOUNDATION
MANAGEMENT
REPORTING
STRATEGIC PLANNING
FINANCIAL CLOSE
PLANNING
PROFITABILITY & COST
MANAGEMENT
1
2
3
4
Common Reporting Workspace
- Excel
- Financial Reporting
- Web Analysis/IR
- Office Integration (ppt, word)
1
EPM Applications
- Strategic Finance
- HFM
- Planning
- HPCM
2
Management Reporting
- Essbase
- Relational
- Data Warehouse
Data Integration
- FDM
- ODI
- File/SQL
5 Master Data/Dimension Mgmt
- EPMA
- DRM
3
4 5 EPMA DRM FDM ODI FILE/SQL
Slide 18
18
• Packaged Profitability functionality
• Computes Profitability for Business Segments, Customers
and Products
• Pre-Built Framework for profitability modeling:
• Pre-built Measures dimension
• Support for Multiple Cost Allocation methodologies
• Pre-Built Validation reporting
• Graphical Interactive Traceability Maps
• Genealogy Reporting shows flow from any stage to any
stage
• A User-Driven application
• Measures, Allocates and Assigns Cost and Revenues via
User Defined Rules
• Finance User-facing Administration
• Provides Scenario Modeling for Decision Making
• Tightly integrated with the full Hyperion EPM Suite
• Shared Data and Metadata via EPMA
• Shared Reporting Tools like Financial Reports & Web
Analysis
• Proven Technology Stack
Hyperion Profitability and Cost Management
Slide 19
Shared Services
• Controlled environment for resources performing transactional, recurring activities
• Centres of excellence
• Leverage expertise and economies of scale
• Overall strategic direction and governance of OMSA Finance
• Finance strategy implementation and monitoring
• Coordinating OMSA Finance activity
Integrated Technology Landscape to Support Those
Processes
Slide 20
Shared Services
• Controlled environment for resources performing transactional, recurring activities
• Centres of excellence
• Leverage expertise and economies of scale
Product Fund Accounting Flow
1. Mgmt Expense
Allocations to
Product Line
(HPCM)
5. Statutory &
Regulatory
Reporting
(HFM or Essbase)
Budget Mgmt
Expenses
(Planning)
3. Product Fund
Allocations
(HPCM)
Actual
Investment
Returns
Actual Client
Ledger Data
(GL)
Drivers &
Assumptions
4. Actuarial
Models
2. Management
Reporting
(HFM or
Essbase)
- Recurring vs. Once-Off
- Initial vs. Maintenance
Cost/Policy
Liabilities
Product
Fund
Reports
6. To
Solvency II
Environment
Actual Mgmt
Expenses
(GL)
7. To Client
Ledgers
Slide 21
Graphical View - Management Expense Allocations to
Product Line
Slide 22
Sample Expense Allocation Flow
Slide 23
HPCM Stages
• Cost Pools are allocated to one or more Stages
• Stage – Step in the allocation process that has similar
pool characteristics
• Separate stages enable traceability and transparency
through each step of the allocation process.
Stage Name Dimension 1 Dimension 2 Dimension 3
1 GL Cost Centre Account Rel. Party
2 Cost Pool Cost Centre Cost Pool
3 Activity Function Activity
4 Product Process Product
5 Fund Product Fund
Slide 24
Stage 1 to Stage 2
Stage 2 to Stage 3
Stage to Stage Example
Slide 25
Dimension definitions – How HPCM Works
Stg1 – GL Stg2 – Cost Pool
Account
Cost
Centre
Related
Party
Cost
Centre
Cost Pool Driver
Driver Selections – Defines what Driver
Definitions to use against the Source
stage, typically the dimension identified as
the driver definition.
Assignment Rules Definitions– Defines the
member combination in the target
dimension for the assignment.
Assignments– Defines the source
dimension combination and the target
Assignment Rule
Driver Definitions – Create a reference to
where the Driver Data is stored within the
model.
1
2
3
4
2 3
1 4
4
Slide 26
Direct and Indirect (Genealogy) Allocations
Drivers Deployed
•FTE (Simple)
•Various % Inputs (Custom)
•Summarization (Even)
Slide 27
Metadata
Management
Allocation
Model
Definition
Cost & Revenue
Allocation
Calculations
Profitability & Cost Analysis
HPCM Workflow for Cost Allocations
Slide 28
Sample Expense Allocation Result
Slide 29
Sample Expense Allocation Result
DRIVER distribution
FY PREMS-COMB COST ON COST-COMB
Accumulator Retail 29.11 11.32
Accumulator Wholesale 54.64 16.97
Closeblock 0.00 7.83
Equivest 2.74 9.39
GGA Wholesale 0.01 0.33
Other 0.05 25.87
Ret Strat/Momentum 8.85 4.07
Term 0.82 7.27
UL/VL/Other 3.79 16.96
100.00 100.00
ALLOCATION to product
Sum of Amount AMO
Prodline ACQ OH ACQ OH
Accumulator Retail 95,336 37,081 29.11% 11.32%
Accumulator Wholesale 178,989 55,579 54.64% 16.97%
Closeblock 25,646 0.00% 7.83%
Equivest 8,988 30,764 2.74% 9.39%
GGA Wholesale 26 1,076 0.01% 0.33%
Other 157 84,739 0.05% 25.87%
Ret Strat/Momentum 28,976 13,334 8.85% 4.07%
Term 2,689 23,799 0.82% 7.27%
UL/VL/Other 12,398 55,541 3.78% 16.96%
Grand Total 327,560 327,560 100.00% 100.00%
50% 50%
PROCESS allocation
Categroy Percentage
NB Selling 50%
HR 50%
100%
Slide 30
HPCM – Validate Model Via Stage Balancing Report
Slide 31
HPCM – Validate Model via Trace Allocations
The path of any allocation can be followed
backwards and forwards, beginning at any
point in the allocation
Slide 32
Business User Driven Allocation Definition & Execution improves flexibility & productivity
Multiple Scenarios for What If Analysis
Traceability Maps for Transparency in the Results
Security & Limited Workflow to secure results
Multi-Dimensional Database Engine supports high speed reporting and ad-hoc analysis for different user needs – available via Web and Office Integration
Integration with rest of Oracle Hyperion EPM solution for Statutory Reporting & Budget/Forecasting Needs
HPCM Benefits
Slide 33
Solvency II is driving companies to look at their internal people, processes & technologies with respect to how they manage Risk and Capital
Product Fund Accounting is one of the precursors to this framework
Based on the quality and nature of the data, some form of allocation will be required
Oracle Hyperion Profitability & Cost Management is a packaged application that provides business users with key capabilities in the definition, execution, scenario modeling, & reporting of the allocation processes that feed into the overall Product Fund Accounting Solution.
Summary
Slide 34
Questions & Key Contact Info
Mike Killeen, Vice President Edgewater Ranzal – UK Division
45 Beech Street, Suite 607
London, UK EC2Y 8AD
E-mail: [email protected]
Slide 35
Appendix I
Screen Shot Demo
Slide 36
Metadata
Management
Allocation
Model
Definition
Cost & Revenue
Allocation
Calculations
Profitability & Cost Analysis
HPCM Workflow for Cost Allocations
Slide 37
EPMA – Create & Manage Dimensions
Slide 38
HPCM – Define Stages
Slide 39
HPCM – Define Drivers
Slide 40
HPCM – Assign Drivers
Slide 41
HPCM – Define Assignment Rules
Slide 42
HPCM – Attaching Assignment Rules
Slide 43
HPCM – Attaching Explicit Assignments
Slide 44
HPCM – Create & Deploy Calculations
Slide 45
HPCM – Validate Model Via Stage Balancing Report
Slide 46
HPCM – Validate Model via Trace Allocations
Slide 47
Appendix II
Typical Project Team
Slide 48
12/13/2011 48
ETL / Essbase / Reporting
Lead Consultant
HPCM
Lead Consultant
Infrastructure
Architect
Delivery Manager/Solution Architect
Account Manager
Client Sponsor
Client Business
SMEs & Core Team
Members
Client Information
Consumers
Client Infrastructure
Resources
(Oracle On Demand)
Client
ETL & Data Owning
Resources
Client
Financial System
Administrator(s)
Client
Report Author(s)
Application Arch.
Sr. Principal
Project Manager/Business
Analyst
Typical Project Team
Client
Project Manager
Project Mgmt
App Dev
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