Actuarial and finance modernization: How do we get there?

Current state

• Financial and regulatory reporting is time consuming, labor-intensive and error-prone.
• The company addresses new reporting and regulatory requirements by adding on to existing processes (which are often spreadsheet based), rather than integrating them into the overall reporting framework.
• Finance "owns" the numbers.
• Financial processes are characterized by a dependency on multiple manual reconciliations.
• Actuaries and actuarial departments use badly dated technology and/or default to tools that are familiar but not entirely fit for purpose.
• The control environment is characterized by back-ended detection controls.

Future state

• The company manages complex financial and regulatory reporting in an efficient and cost effective manner, and presents information in a clear manner.
• New reporting requirements are integrated into overall finance, actuarial and risk management work flows.
• Actuarial "owns" several key balances.
• There are consistent assumptions for GAAP, PBR, and risk reporting.
• The finance, actuarial, risk management, and operations use consistent data, assumptions, systems and processes to produce metrics.
• Automated feeds and processes reduce time, fewer manual feeds and reduce dependencies on specific personnel; overall, this reduces error and improves process efficiency.
• The control environment is characterized by front-ended preventative controls – increasing confidence in results at Board and C-suite level.

Current state

• The IT environment is characterized by multiple platforms, legacy systems, and calculation engines.
• Actuarial often believes IT does not understand its needs and lacks the flexibility to perform all desired analyses. In turn, IT often believes actuarial lacks discipline and control.
• Data is poorly managed across multiple repositories.
• Multiple sources of the truth – no standardized data directory.
• Significant amount of resource spent generating data and addressing and data needs.
• Expensive to maintain and manage.

Future state

• Actuarial production systems are supported by and integrated with the IT functions platforms, and there is enhanced enterprise architecture for data systems and tools.
• New reporting requirements are integrated into overall finance, actuarial and risk management work flows.
• Data warehouses and integrated systems support improved analyses, and improved automation and enhanced tools facilitate a "single source of the truth".
• Employees are able to focus on value-added analysis that informs stakeholders of pertinent developments in a timely manner.
• A manageable number of modern calculation engines.
• More timely and relevant information is available for strategic and operational planning and decision making.

Current state

• Investors find it hard to understand the "value drivers" in the business CEOs complain that their companies are undervalued. New reporting requirements will create a new reporting language.

Future state

• Investors understand the business better because they can clearly see the drivers of short- and long-term profitability.

Current state

• Capital is expensive and used inefficiently.

Future state

• Access to cheaper sources of capital.
• Capital decisions reflect impact on all relevant metrics.