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Case study with Viridium Group that highlights how you can future proof your actuarial reporting to meet the evolving demands of life portfolio consolidation

The client

Viridium Group is the leading specialist in the management of life insurance portfolios in Germany and operates the largest consolidation platform in that market. The company, in particular, currently manages two large blocks of businesses bought – the inforce business of Skandia and of Heidelberger Leben.

The problem

Until recently, the company used a different cash flow projections tool for each business block – MoSes provided by Willis Towers Watson and a competitor solution. In line with their wider objective of maximising the efficiency of their management of life insurance policies and the economies of scale needed to minimise administrative costs per policy, they had decided to select one projection platform to support both blocks of business.

Through its modern, open and flexible modelling system, RiskAgility FM was easily adapted to our products and processes, which also benefit from the solution’s enhanced processing performance and latest software technology needed to effectively manage ongoing portfolio integration, M&A activities and regulatory challenges, such as Solvency II and IFRS
Michael Sattler,
Chief Financial Officer, Viridium Group

After evaluating various options, the Viridium Group’s senior management allowed its modelling team to make the final decision. Despite having more experience with the competitor’s product, the team chose Willis Towers Watson’s RiskAgility FM solution to help deliver the insurer’s need for improved efficiency, a better controlled production environment, greater automation, fewer errors and effective compliance with changing regulatory demands.

The challenge

As illustrated by Figure 1, the Viridium Group’s set of applications was highly fragmented before Willis Towers Watson were asked to help.

Figure 1. Viridium Group's situation before the project

Figure 1. Viridium Group's situation before the project
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The four core challenges of the project were:

  1. Integration of different models – the Viridium Group wanted one solution as current modelling diversity and complexity would lead to limiting bottlenecks in light of expected future takeovers. This meant consistency across various models and a smooth and quick integration process were essential. The company also needed to reduce its implementation sites from three to one.
  2. Efficiency – the solution’s applications would have to be fully open and transparent, and the client’s team able to customise them to accommodate company-specific features. This would also help the company achieve self-reliance in their financial modelling operations. The amount of manual interventions and workarounds also needed to be kept to a minimum.
  3. Control – perhaps even more important than cost, multi-portfolio integration / set-up creates large potential for errors and owners and investors will understandably show little tolerance for this.
  4. New requirements – while a major focus is on the cash flow production for the purchased portfolios, the Viridium Management also required the installation of a generic but consistent M&A valuation model in RiskAgility FM. This model needed to allow for changing statutory reporting and future requirements, for example under Solvency II and IFRS, in order to avoid any post-purchase surprises and to guarantee a smooth integration of the portfolio.

Our approach

To overcome these challenges, we jointly converted the Viridium Group’s two big blocks of business to the RiskAgility FM model, which is designed to ensure the company is able to easily adapt the system to their way of doing things, rather than forcing them to conform to rigid software requirements.

In order to fully leverage the benefits of RiskAgility FM, the Viridium Group also licensed additional Willis Towers Watson technologies from our Solutions for Life portfolio of life insurance software and consulting services to provide them with an integrated end-to-end solution to their risk and actuarial reporting process:

  1. C-ALM (Central Asset/Liability Management) suite – offers a well-structured asset/liability framework to help quantify and measure value, economic capital, risk and earnings, and to meet new regulatory demands such as Solvency II and IFRS.
  2. A generic German Market Model for M&A purposes – C-ALM also provides the Viridium Group with the ability to run model points or to read in cash flows (generated by any other system) in an M&A situation.
  3. Clustering and linear optimisation model – this model helps the company automate production of model points for stochastic projections.
  4. DataValidator – helps the company validate, cleanse and transform data efficiently, preparing it for use in financial modelling and reporting processes.
  5. High Performance Computing (HPC) – with RiskAgility FM, the Viridium Group can expand on their in-house IT resource to run their models faster and more cost efficiently through direct access to Microsoft Windows HPC and more recently also through Willis Towers Watson’s vGrid. This gives the company flexible, scalable options for distributed processing so they can get fast, precise calculation results when they need them.
  6. Regular delivery of economic scenarios with STAR ESG – Willis Towers Watson’s economic scenario generator gives the Viridium Group a software toolkit for setting investment strategy benchmarks, portfolio construction, ALM, pricing, capital setting and the market consistent valuation of options and guarantees.

Figure 2. Viridium Group using C-ALM in RiskAgility and DataValidator

Figure 2. Viridium Group using C-ALM in RiskAgility and DataValidator
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The result

Aside from providing the Viridium Group with the latest software technology for enhanced performance and ease of use, the aim was to help the company save time and money, comply with regulatory demands and optimise data from legacy systems.

Key outcomes identified by the Viridium Group:

  1. One reporting solution – the Viridium Group is now able to use RiskAgility FM for all their internal reporting purposes, including Solvency II reporting, as well as their M&A valuations and risk capital modelling.
  2. Flexibility for future integration – the ability to integrate model amendments quickly was an essential requirement of the Viridium Group and has been successfully delivered by RiskAgility FM. The solution’s flexibility and ease of use will prove to be valuable assets for the insurer as it continues to integrate new joiners’ product designs and company practices into the business, against the backdrop of evolving regulatory requirements.
  3. Future-proof M&A market model – RiskAgility FM / C-ALM gives the Viridium Group a modern, future-proof M&A market model, including “windshield appraisals” in the context of buy-side M&A, that is especially designed to perform stochastic calculations or by just reading in deterministic cash flows.
  4. Greater governance and streamlined processes – in addition to RiskAgility FM’s ease of integration, moving from two to just one projection platform has also led to the Viridium Group benefiting from greater governance and control provided by a more streamlined process, significant efficiency gains due to reduced IT requirements and a saving on licence fees.
  5. Agile technology – the Solutions for Life approach ensures the Viridium Group’s risk and actuarial processes are able to adapt to meet changing business requirements, as we bring together our technology and industry expertise to continuously refine the portfolio to provide cutting-edge solutions.