Session 63, Benefits and Design of a Comprehensive Reporting & Analytics Package. Moderator: Jason Matthew Hiquet, FSA, CERA.

Transcription

1 Session 63, Benefits and Design of a Comprehensive Reporting & Analytics Package Moderator: Jason Matthew Hiquet, FSA, CERA Presenter: Jason Matthew Hiquet, FSA, CERA Antonio D. Johnson, ASA, MAAA Connie W. Tang, FSA, MAAA, CERA

2 Benefits and Design of a Comprehensive Reporting and Analytics Framework Tony Johnson, ASA, MBA, MAAA Jason Hiquet, FSA, CERA

3 Contents Current Landscape The Move Towards Comprehensive Reporting 3 Factors Driving Need for Enhanced Reporting 4 What Does it Mean For My Company? 5 A Force for Organizational Improvement 6 Benefits of a Comprehensive Reporting & Analytics Framework 7 Increased Consistency of Terminology and Methodology 8 Increased Consistency of Timing and Structure 9 Improved Data Sourcing and Granularity 10 Enhanced Flexibility of the Reporting Environment 11 Increased Consistency of Messaging Across Departments 12 Example of a Comprehensive R&A Package 13 The Goal Objectives and Approach 14 R&A Framework Overview 15 Suite of Analytics and Reports 16 Interaction of Analytics and Reports 17 Critical Success Factors 18 Copyright 2016 Deloitte Development LLC. All rights reserved. 2

4 Current Landscape The Move Towards Comprehensive Reporting Copyright 2016 Deloitte Development LLC. All rights reserved. 3

5 Factors Driving Need for Enhanced Reporting Advances in technology combined with external and internal demands have increased the need for companies to report across products, business units, and legal entities, in a consistent and controlled manor. Management Requirements Reporting Changes and Trends Analyst Insights Shareholder Demands Customer Knowledge Competitive Pressures Copyright 2016 Deloitte Development LLC. All rights reserved. 4

6 What Does it Mean For My Company? In today s uncertain market environment, developing an effective reporting package is much more than just the cost of compliance or financial statement development. Timely Consistent Insightful Requirements for Data & Reporting Reliable Actionable Flexible While a comprehensive reporting package can ease the burden of internal and external audits, as well as regulatory oversight at the state and federal level, the true benefit comes from enabling the reporting to drive intelligent business decisions. Copyright 2016 Deloitte Development LLC. All rights reserved. 5

7 A Force for Organizational Improvement A consolidated reporting and analytics package can help your organization reach the full potential, either on its own or as part of a larger modernization initiative. In particular, an R&A package should drive improvement in the following areas: Consistency of terminology & 1 methodology 3 Ease of data sourcing and appropriate granularity of data 5 Messaging across departments, LOBs, or BUs 2 and Consistency of report structure timing 4 Flexibility of the reporting environment Copyright 2016 Deloitte Development LLC. All rights reserved. 6

8 Benefits of a Comprehensive Reporting & Analytics Framework Copyright 2016 Deloitte Development LLC. All rights reserved. 7

9 Increased Consistency of Terminology and Methodology For business leaders to be confident in the information they receive, departments and lines of business should use consistent approaches. During the process of developing a company-wide R&A package, inconsistencies are often found and can be corrected. Sample Terminology Questions to Ask Your Organization Definition of True-Up and Unlocking Model Correction vs. Enhancement Unattributed vs. Unexplained Variance Use of plugged values or catch-all items Sample Methodology Questions to Ask Your Organization Treatment of negative EGPs and PFBL Timing and calculation of interest on DAC Granularity of DAC/Reserve caps and floors Allocation of AGPs across policies and cohorts Copyright 2016 Deloitte Development LLC. All rights reserved. 8

10 Increased Consistency of Structure and Timing With a comprehensive and automated R&A framework, reports are generated in a consistent format and are delivered to Finance, Corporate Actuarial, Risk, and other stakeholders at the same time, allowing for an alignment of company-wide analytics. Annuity Individual Life Retirement International Group Each business unit generates the data required to populate the report on the same business day. With the reports in the same format, using common terminology and approach, the information can be consolidated across business units in a prompt manner. Corporate functions can easily spot abnormalities across business units and be better prepared to answer questions to internal and external stakeholders. = Total Company Copyright 2016 Deloitte Development LLC. All rights reserved. 9

11 Improved Data Sourcing and Granularity of Data To execute a comprehensive R&A package, data should be stored in a shared data warehouse. The granularity at which data is exported into reports should vary depending on the audience. Annuity Individual Life Retirement Inforce Data Model Output PVP & Excel Inforce Data Model Output PVP & Excel Inforce Data Model Output PVP & Excel International Group Inforce Data Model Output PVP & Excel Consolidated Warehouse Inforce Data Model Output PVP & Excel R&A Output BU Reports & Analytics Corporate Reporting Ad-Hoc Reporting Copyright 2016 Deloitte Development LLC. All rights reserved. 10

12 Flexibility of the Reporting Environment Once data is in a consolidated warehouse, with identified dimensions and a consistent level of granularity, reports can be generated on-the-fly by business units and corporate functions. Report Data Filters Common Warehouse Dimensions Reporting Entity (GAAP) / Legal Entity (Stat) Age of Business New business Inforce Income Impact AOI Non-AOI OCI GAAP Reinsurance Direct Ceded Assumed Net Profit Center Transaction Currency System-Related Product Group Product Type Detailed Product Name GAAP Statutory TAX IFRS Issued Functional Translated Constant Modeled vs. Non-Modeled Admin Plan Code Cohort Contract Distribution Channel Agent Direct Date Range Three years annual Eight quarters rolling Aggregation Level LRT PFBL Other Copyright 2016 Deloitte Development LLC. All rights reserved. 11

13 Messaging Across Departments When information is sourced and presented in a common manner, messaging across Risk, Finance, Controllership, and Actuarial is consistent. Interpreting Results Comprehensive reporting allows Actuarial to interpret results efficiently and drive the message outward. Other functions should not be interpreting actuarial results on their own. Modifying Results Standard reporting reduces the need for Finance & Risk to take raw actuarial data and generate reports internally Responding to Questions The flexibility of the R&A layer allows actuaries to respond to one-off and adhoc requests, and control the message on quick turnaround items Ease of Audit Consistency in reports increases the ease of an audit / external review, as results are generated from a controlled environment in a structured manner using a common language. Copyright 2016 Deloitte Development LLC. All rights reserved. 12

14 Example of a Comprehensive R&A Package Framework Copyright 2016 Deloitte Development LLC. All rights reserved. 13

15 The Goal - Objectives and Approach A comprehensive R&A package should allow the Actuarial function to assume a more strategic role in the organization, based on the adoption of redeveloped foundational capabilities and associated technology. Core objectives include: Design standardized reporting and analytics templates that will reduce time needed for development and increase value-added activities used to analyze the business Develop the proper analysis that help provide insight into movements of components relative to other core balances Lower Bound Provide the tools and mechanisms to set tolerances that can be leveraged to trigger additional analysis Upper Bound Align business units using a reporting framework with consistent language, methodologies and definitions Copyright 2016 Deloitte Development LLC. All rights reserved. 14

16 Reporting and Analytics Framework Overview Below is a sample framework to enhance reporting and analytical capabilities within an organization for the Actuarial function. Reports from LOBs to Corporate Functions and Executive Analytics Validation Roll-forwards Balances Roll-forwards Margin Analysis Roll-forwards SOE & A/E LOB / Function LOB / Function LOB / Function LOB / Function Level 3 Corporate Finance Risk Actuarial Investments Operations Level 2 Executive Level 1 Information requests from Executive and Corporate Functions to LOBs Analytics support each reporting level and are foundational to the reporting framework Provides LOB leaders and functional leaders with enough information to identify where to perform additional analysis. Reports represent an aggregate view of the business units for the organization; includes executive summaries Information is summarized for management consumption; Elevator Speech context Copyright 2016 Deloitte Development LLC. All rights reserved. 15

17 Suite of Analytics and Reports Analytics used by the line-of-business actuaries are sourced in a consistent manner, from a common liability warehouse. Validation and Trends Roll-forward Balances Margin Rollforward & Attribution Analysis Analytics Basic Reserve Trend Analytics Exceptions-Based Reporting Assumption Validation A/E Analysis Static & Dynamic Validation Account Value Reserves GAAP, Stat, Tax DAC, URR SIA / DSI, SIL, DPL SOP 03-1 and 00-3 Dividend Fund and TDL FAS 113 FAS 97 DAC Margins LRT Attribution FAS 133/157 Attribution AG43 Attribution AAT Attribution K-Factor Reporting Level 3 Business Unit Level 2 Corporate Level 1 Executive Reports BU Reserve Package BU Finance Package Additional BU analysis Rep Letter Year-end GAAP Memo Actuarial Opinion & Memo (AAT) Blue Book Finance Package Earnings Analysis Risk Dashboards Impact of Insurance Risk Portfolio Position Reports Financial Plan and Forecast Capital Plan (RBC, C3P2) Corporate Finance Package 10-K / 10-Q Analyst Reports Roll-forwards SOE & A/E Source of Earnings Actual vs Expected Margins Actual vs Expected Rollforwards Copyright 2016 Deloitte Development LLC. All rights reserved. 16

18 Interaction of Analytics and Reports Analytics produced by each LOB are used to explain the events of that LOB during the quarter. The message is first consumed by Corporate Actuarial, then is later submitted to Corporate Finance for executive stakeholder use. Company s Reporting & Analytics Framework $ Corporate Actuarial Analytics Corporate Finance Copyright 2016 Deloitte Development LLC. All rights reserved. 17

19 Critical Success Factors Implementation of a comprehensive reporting and analytics package requires success along a number of critical success factors. Buy-In from LOB and Finance/Other Stakeholders The LOB actuaries and other functions may have to perform work that could upend existing processes and roles, with benefits that may initially occur at the company-wide level as opposed to the LOB level. Buy-in is key to ensure success. Flexible Data Warehousing Environment A company-wide data warehouse needs to be able to handle balances, cash flows, and attributions from a wide variety of product, models, and attributes. Prioritization of Reports The design and build of a comprehensive R&A package should identify the reports that are most important (e.g., FAS 97 DAC Rollforward) and score quick wins by completing these reports first. Clear Authority on Company-Wide Decisions - Decisions on report structure, accounting policy, and more will be made at a company-wide level, affecting multiple LOBs. There needs to be an accepted decision-maker, with full support from the organization. Increased Effectiveness of Reporting While consolidating the reporting approaches across products, legal entities, and LOBs, it is crucial to make sure that LOB actuaries do not lose any existing analytic tools (outside of report rationalization processes) Copyright 2016 Deloitte Development LLC. All rights reserved. 18

20 About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ( DTTL ), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as Deloitte Global ) does not provide services to clients. Please see for a detailed description of DTTL and its member firms. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright 2016 Deloitte Development LLC. All rights reserved. 36 USC

21 Valuation Actuary Symposium - Session 63: Benefits & Design of a Comprehensive Reporting & Analytics Package Connie Tang, FSA, MAAA, CERA, CFA August 30, 2016

22 Our Experience Corporate Actuarial GAAP Oversight formally kicked off a multi-year Reporting & Analytics project in 2015 Driven by the desire to implement best practices Still in progress Currently implementing selected analytics Already yielding direct and indirect benefits Lengthy process reflected the need to Incorporate stakeholder needs and obtain stakeholder buy-in Address underlying actuarial and accounting / ledger processes and infrastructure Consider practical constraints 2

23 Motivators Internal objectives to streamline processes and improve analytics Improve consistency within and across business units Improve the granularity of analysis Improve communication of key drivers Single source of information Enable enterprise reporting Anticipated regulatory changes Fed reporting (e.g., FR 2085) FASB targeted improvements 3

24 Project Phases Planning Initial stakeholder meetings to discuss objectives, current practices, and pain points Collect and analyze existing reports and analysis Develop templates with common definitions and multiple levels of line item detail and granularity Proof of Concept Stakeholder meetings to discuss proposed scope and templates All business units test populate selected templates at an aggregate level and assess proposed requirements One business unit test populates all templates Interim State Stakeholder discussions to confirm feasibility Implement selected templates (aggregate view only) in quarterly review process Incorporate templates in the actuarial architecture business requirements Ultimate State [Future] Implement and automate all templates as the actuarial architecture and system projects (e.g., valuation system conversions, liability data warehouses) are implemented Templates are the single source for all actuarial and finance reporting packages Update templates and packages to reflect ongoing stakeholder and regulatory requirements 4

25 Strategy for Building Stakeholder Support Included key stakeholders at every stage of the process Business unit actuaries Corporate and business unit finance / controllers Identified business unit benefits Not just a corporate initiative Functionality for business unit analysis Eliminate redundant reports Reduce reconciliations, follow-up questions, and misunderstandings Designed templates that recognized that different businesses require different levels of analysis and promoted consistency without sacrificing flexibility Developed four levels of line item detail and defined how each level rolls up Two highest levels support internal corporate and external reporting and analysis Middle level helps identify and communicate a consistent set of key drivers Most granular level for additional business insights Developed drill down options / granularity that reflect data availability and how the businesses are managed Considered materiality Proof of concept identified how already available information could be leveraged Reflected business unit readiness and constraints in full implementation timing 5

26 Process & Infrastructure Considerations Implementing an automated reporting and analytics framework requires significant enhancements to underlying processes and infrastructure. Reporting & Analytics Ledger Processes Enterprise Infrastructure Actuarial Architecture 6

27 Related Enhancements Ledger processes Encountered inconsistencies in ledger balance sheet and income statement subaccount usage No impact on reported financial statements but hindered more detailed analysis Kicked off a ledger deep dive project with corporate and business unit controllers to review all actuarial subaccount definitions and align business unit booking practices Worked with corporate controllers to enhance the process for reviewing, approving, and communicating requests for new actuarial subaccounts Actuarial architecture Worked with the Actuarial Transformation Team to reflect reporting requirements in valuation system and liability data warehouse requirements Full reporting and analytics capabilities depend on the rollout of the actuarial architecture Enterprise reporting infrastructure Worked with IT to develop a platform for accessing and compiling business unit results Allows the uploading of reporting templates (interim state) or automatic population of templates from the liability data warehouse (ultimate state) Includes formal sign-off and workflow functionality 7

28 Reporting & Analytics Lessons Learned Requires management commitment and significant Actuarial, Finance, and IT resources to Define common actuarial terms, metrics, levels and granularity of analysis Align actuarial and finance requirements, data, and processes Build business unit and corporate infrastructure and controls Need to balance consistency with flexibility Standardized but not one size fits all Full implementation is a multi-year effort Phased implementation and related enhancements generate early benefits Timing may differ across business units 8