<Insert Picture Here> EPM for Insurance: Better Planning & Detailed Analysis

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1 <Insert Picture Here> EPM for Insurance: Better Planning & Detailed Analysis Margarita Varvitsioti EPM Sales Manager, Romania and GCMM 7 April 2011

2 The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle s products remains at the sole discretion of Oracle.

3 Agenda Insurance Market Conditions Overview Enterprise Planning & Detailed Analysis Oracle Insurance Customers

4 Insurance Market Dynamics The needs that drive your business decisions BUSINESS AGILITY Insurance RISK & COMPLIANCE Life General Benefits & Health OPERATIONAL EFFICIENCY

5 The Diversity Of Economic Development & Insurance Penetration Raises Concerns For Insurers In Europe Rebuilding capital and reevaluating core businesses Companies face the challenge of simultaneously rebuilding capital and growing revenues by evaluating their existing business models and product offerings to achieve the optimal use of scarcer capital Developing a holistic approach to risk management There are numerous issues surrounding the integration of risk into a company s operation and the effects on the decision-making process that insurers need to address Capitalizing on opportunities for retirement products and health insurance Insurers will continue to find new product opportunities in 2011 from the ageing of Europe s population Challenges in the Europe Insurance Industry Preparing for Solvency II implementation The cost of implementing this new regulation will be significant in terms of financial an human resources Solvency II will represent a major investment for all Reprioritizing investment in expansion Targeted opportunities may emerge for financial institutions as they shed insurance businesses in an effort to divest themselves of non-core operations and make up for capital shortfalls Handling increasing complexity in a changing regulatory environment Consumers, rating agencies and regulators will be seeking greater transparency in insurers financial conditions This creates challenges in reporting key performance measures to consumers, investors and regulators Source: E& Y report, Jan

6 Solvency II To Redefine IT Infrastructure Of Insurance Companies In Europe Solvency II Framework Delivering a Solvency II Technology Program Will Require 3 Key Elements From a Technology Perspective, Each of the Program Pillars Presents a Different Set of Challenges to Overcome: Pillar One - Quantitative Data quality will be key to producing reliable calculations Pillar Two - Qualitative IT governance, internal audits and automation are all key elements Pillar Three - Disclosure & Transparency Underlying data models will support the necessary reports and dashboards for internal and external consumption Integrating existing systems which will now be required to work together Changing those existing systems as necessary Adding new tools where existing technology cannot be adapted to meet requirements Source: Delloitte, KPMG 6

7 Stakeholder Requirements Solvency II Programme Chief Actuary Chief Information Officer Faster production of information in real time Graphical and analytical reports for the regulators and the business Faster financial close Sensitivity and what if analysis Centralised and consistent modelling platform for all actuarial users Automated modeling processes Audit & security controls for governance and compliance CA CEO CIO Robust IT governance Power to run complex models n Centralised modeling platform based on standard Microsoft technologies n n n n Deployment across the enterprise Seamless integration with other enterprise systems Centralised database for enterprise access Automated data extraction/ transformation Chief Risk Officer n n n n n n Internal model approval Understanding of key assumptions Risk calculations to accurately reflect the underlying risk profile Enterprise-wide consistent risk management standards Auditable and transparent modelling and risk processes Graphical and analytical reports for the regulators and the business CRO CFO Enhanced business performance through risk-based decision making Chief Financial Officer n n Consistency of external reporting (e.g. IFRS, SII, MCEV) Faster, controlled production of accounting reports e.g. inputs to IFRS statements Graphical and analytical reports for the regulators and the business Faster financial close 7

8 Solvency II - Phases SII is complex and impacts the enterprise as a whole. For most major insurers SII is likely to be implemented in two phases Phase 1 Compliance Phase 2 - Consolidation Tactical approach to achieve initial compliance - e.g. QIS 5 and Internal model approval Largely utilizing existing components Spaghetti and sellotape wrap approach Focus on data and capital numbers TACTICAL Strategic approach Enterprise based ERM Platform Replacement of legacy components Deeper embodiment of risk culture within the business Lower total cost of ownership STRATEGIC

9 Agenda Corporate and Business Segment Overview Performance Overview Industry Observations and Trends Industry Solution Overview Customer Case Studies 9

10 Priorities and Pressures on the CFO ENVIRONMENT Agility COMPETITION/ CUSTOMER CHOICE Visibility REGULATORY Efficiency OPERATIONAL EXCELLENCE Business Transformation

11 Our Vision for Solvency II Oracle Solvency II Vision Enterprise Risk Management Platform Insurance, Risk & Actuarial Data Reporting & Analytics Risk & Actuarial Modeling Engine Computing Power & Scalability Audit, Security & Compliance Future Proofed Capabilities Corporate ERM Common Technology Platform

12 Oracle Integrated Actuarial, Risk & Finance Platform Product Development SII Reporting/Analytics Engine Management Reporting IFRS Continuous Solvency Monitoring Dashboards What-If & sensitivity analysis Performance Management Source Data General Ledger Financial Systems Policy Systems Claims Data Warehouse Reports/Analytics Actuarial/Financial Data Operational Data Operational Risk Insurance Risk Credit Risk Policy Data Market Risk Actuarial & Risk Engines Economic Capital Aggregation Standa rd Model ALM Cash Flows & Valuation Replicating Portfolios Pricing Financial Consolidation Financial Consolidation Product Profitability Strategic Financial Planning Budgeting Investment Systems ESG Meta Data Management, Reconsolidation Framework & Process Flow Automation Audit, Security & Control Compute Grid

13 Five Core Management Processes 13

14 Case study of Actuarial Spaghetti! 14

15 Impact of poorly integrated Management Processes 15

16 Introducing Oracle s EPM System From Beginning to Winning Copyright 2010 Oracle and/or its affiliates. All rights reserved.

17 Oracle s Enterprise Performance Management System Complete, Open, Integrated Information Delivery EPM and BI Applications Business Intelligence Foundation OLTP & ODS Systems Data Marts Data Warehouse Database Machine OLAP Cubes Oracle, PeopleSoft, JDE Siebel, SAP, Fusion Excel XML Business Process Copyright 2010 Oracle and/or its affiliates. All rights reserved.

18 Common Information Delivery Secure, Role-based, Information Access & Delivery Interactive Dashboards Reporting & Publishing Ad-hoc Analysis Detect & Alert Mobile & Disconnected Office Integration Search Embedded EPM and BI Applications Business Intelligence Foundation OLTP & ODS Systems Data Marts Data Warehouse Database Machine OLAP Cubes Oracle, PeopleSoft, JDE Siebel, SAP, Fusion Excel XML Business Process Copyright 2010 Oracle and/or its affiliates. All rights reserved.

19 One Window, Not Multiple Oracle EPM Workspace Self-service Personalization Contextual navigation OBIEE and BI Publisher integration WebCenter integration Spans all solutions in the Oracle EPM System Copyright 2010 Oracle and/or its affiliates. All rights reserved.

20 Unified Microsoft Office Interface Smart View for Office Adhoc Reporting Stylized Output: Formats Tables Charts Formulae Data Entry and Apps Processing Word and PPT Now works with OBIEE as source Copyright 2010 Oracle and/or its affiliates. All rights reserved.

21 Common Foundation Services Common User Provisioning Common Application Administration Common Calculation Manager Common Installation and Configuration Common Lifecycle Management Copyright 2010 Oracle and/or its affiliates. All rights reserved.

22 Oracle s Enterprise Performance Management System Complete, Open, Integrated Information Delivery Scorecards Interactive Dashboards Reporting & Publishing Ad-hoc Analysis Office Integration Search Detect & Alert Collaborate Mobile Embedded EPM and BI Applications Strategy Management Financial Close and Reporting Planning & Forecasting Profitability Management ERP Analytics CRM Analytics Industry Analytics Business Intelligence Foundation BI Server Essbase Dimension Management Predictive Analytics OLTP & ODS Systems Data Marts Data Warehouse Database Machine OLAP Cubes Oracle, PeopleSoft, JDE Siebel, SAP, Fusion Excel XML Business Process

23 Market-leading Performance Management Applications Suite Strategic Planning Planning and Budgeting Financial Close Process EPM Governance Shared Master Data Lifecycle Manager Data synchronisation Cost & Profitability Management Data Cleansing Consolidate Internal Reporting & Analysis External Reporting & Analysis Audit & Certify Financial results Governance, Risk & Compliance

24 Improve Timeliness and Confidence in Financial Close & Reporting

25 Implementing a World Class Close Oracle s Extended Financial Close Solution CFO Dashboard Governance, Risk & Compliance Financial Close Management ERP: Oracle, SAP, Legacy, Other Data Assurance Financial Consolidation Tax Calculations Financial and Mgmt. Reporting Tax Filing Document Management & Filing Transactions Reporting

26 Oracle Hyperion Financial Management Accelerate Reporting Cycles and Reduces Costs of Compliance Patented financial consolidation and reporting features Complete audit trails, workflow and validations Smart Dimensionality Flexible what if scenario management features Powerful, reporting and analysis tools Full integration with GL and other transaction systems Easy to customize and extend Web-architected Copyright 2010 Oracle and/or its affiliates. All rights reserved.

27 Fast and Reliable Financial Reporting Sustainable reporting architecture to deal with the myriad of reporting requirements unique to insurance World class financial consolidation and reporting platform reduces internal control risk Delivers single version of the truth for financial reporting Data integrity tools built into the close process Seamless integration with your existing financial systems Web-based architecture allows for world-wide collaboration on the close process

28 Oracle Hyperion Disclosure Management Statutory Reporting Made Simple Author statutory documents from Smart View for Office MS Word and Excel for authoring Direct integration with HFM and Essbase Support for all required report formats: MS Word, HTML, PDF Embedded XBRL tagging support Taxonomy Management Instance document creation and validation

29 The Only Vendor Offering Financial Master Data Management Consolidate & rationalize dimensions across source systems Change management for dimensions Conform dimensions & validate integrity of attributes and relationships Align alternate business views Key features include: Business experts configure & maintain Versioning and modeling Custom business rules and validations Derived & inherited attribute values Configurable exports Granular security Enhance compliance & governance Workflow integration

30 Align Hierarchies Across ERP and EPM COMPANY OVERVIEW $1.9 trillion in Assets 115,000 employees CHALLENGES/OPPORTUNITIES Frequent mergers, acquisitions, divestitures and financial reorganizations Complex financial structures with compound inter-company trade relationships, eliminations Need for financial accuracy required rigorous manual testing cycles and reconciliation efforts for every significant change Financial master data had been centralized in a financial data warehouse (FDW), but the FDW lacked change management features SOLUTIONS Hyperion Data Relationship Management Hyperion Data Integration Management RESULTS Implemented Hyperion Data Relationship Management to master chart of accounts (entities, accounts, projects, products, etc.) Automated enforcement of financial business rules example: All asset accounts must be mapped to one or more risk types Greatly reduced risk of inconsistency between GL and EPM applications Impact analysis - Ability to understand how hierarchy changes effect specific legal report lines

31 Rising to New Levels of Accountability

32 Attention to Internal Controls over 1 Financial Reporting State insurance commissioners zero in on financial reporting Bad economy has heightened insurance claims and fraud 2 Fraud threatens the financial solidity of insurance companies and their public confidence capital 3 Financial reporting is core to proving financial strength and solvency Insurance Company Mortgage Fraud Loss $4-6 B Property & Casualty $30B Health $68-226B NY, FL, WI State Fraud Bureaus reported a one-third increase in the number of insurance fraud cases in The cost of fraud bears on insurers as well as policy holders who pay higher premiums State commissioners consider financial reporting as the underpinning to their solvency and fraud oversight activities

33 Oracle Model Audit Rule! End-to-End Policy & Process Management Governs Risk and Compliance Activities Enterprise Control Management Detects and Prevents Control Failures Integrated Analytics Deliver Actionable Insight

34 Oracle Model Audit Rule! End-to-End Policy & Process Management Governs Risk and Compliance Activities Enterprise Control Management Detects and Prevents Control Failures Integrated Analytics Deliver Actionable Insight

35 Enterprise Control Management Detect and prevent control failure Monitor Control Effectiveness What users have done Detective Controls What s changed in the environment What are the execution patterns ACCESS Controls CONFIGURATION Controls TRANSACTION Controls What users can do How the environment is setup Preventive Controls How users execute processes Enforce Policies in Context

36 Oracle Model Audit Rule! End-to-End Policy & Process Management Governs Risk and Compliance Activities Enterprise Control Management Detects and Prevents Control Failures Integrated Analytics Deliver Actionable Insight

37 Enterprise Visibility to GRC Status Secured and targeted delivery of role-based dashboards Oracle Enterprise GRC Manager This is to notify you of AML and SOX alerts. The Executive Dashboard is awaiting your review. Please use the following link to access your reports Go To Executive Dashboard Summarized view of key information highlighting potential trouble areas

38 Dynamic Analysis and Decision Support Variety of charting and display options

39 Getting to the Root of the Issue Drill down from dashboard to detailed transaction

40 Cross-Enterprise Risk Analysis Reporting on Oracle and non-oracle data sources Consolidated view of financial balances from Hyperion Financial Management and risk rating from GRC Manager

41 Extend Planning Reach Across the Enterprise

42 Reduce Budget Cycle by Months, Scenario Analysis by More Than 50% AVG. HOURS FOR FINANCIAL MODELING MONTHS TO ASSEMBLE BUDGET Copyright 2009, Oracle and/or its affiliates. All rights reserved. 42

43 Achieve a World Class Enterprise Planning Process Run models based on key strategies Set targets Validate operational feasibility to financial plan Update forecast with latest budget and actuals Seed targets to annual operating plan Start annual process Evaluate resource and capital requirements Assess and Manage Risk Update strategic plan with latest forecast Copyright 2009, Oracle and/or its affiliates. All rights reserved. 43

44 Disconnected Processes Lead to Inefficiency and Missed Targets Time cycles take too long, missed opportunities and obsolete plans Treasury Plans Long-Term Planning M&A Quality data integrity, lack of standardization and communication Senior Management Flexibility lack of responsiveness to changes Annual Plan & Forecast Cost many wasted resources, questionable benefits Headcount Plans FP&A Departmental Plans Revenue & Cost Models Copyright 2009, Oracle and/or its affiliates. All rights reserved. 44

45 Critical Components to Implement Planning Best Practices Predictive Modeling & Simulation Functional Plans Long-Term Financial Planning Workforce Planning Capital Assets Planning Project Planning Marketing Planning Operational Revenue & Cost Modeling Planning, Budgeting & Forecasting Forward-looking Analytic Engine Financial Detail Operational Detail Copyright 2009, Oracle and/or its affiliates. All rights reserved. 45

46 Key Capabilities Accelerate the Enterprise Planning Process Centralized system Align top-down and bottom-up Consistent assumptions Common allocations & calculations Integrated Operational Planning to address in-depth revenue and margin planning Purpose-built Capital Assets and Workforce planning modules for fast deployment Powerful workflow and process management for budgeting and forecasting Leverages Essbase powerful reporting and analysis Copyright 2009, Oracle and/or its affiliates. All rights reserved. 46

47 Financial Planning in Insurance Scope Balance Sheet, P&L, CF IFRS Reporting Revenue Forecast Expense Estimation about industry potential and market share Distribution of total premium (time/ channel/region) Assignment of quotas to agencies Defining average price of insurance policy Predictive Analysis for usage ratios. Calculation of direct expenses (Commissions, Legal Expense, Health and Welfare, Loss Expense) Derivation, Collecting or Calculation of Indirect & Fixed Expenses Financial Expenses, Funding & Investment Planning

48 Manage Staff Expenses of Thousands of Employees One of the 20 largest financial institutions worldwide and ranked in top 10 in Europe. Before Days to get HR data in 8 weeks for first budget iteration 10 days to transfer employees 4 weeks to create and distribute Excel templates Data was not dependable Corporate budget group had 9 FTE s to maintain the process After Few minutes to enter HR data 4 ½ weeks for first budget iteration Reorganizations down to 24 hours Next phase scale to 50,000 employees Detailed budget to 700 accounts Rapid user adoption due to user friendliness Implemented initial budget for 10,000 employees within 4 months

49 Key Capabilities Predictive & Detailed Analysis Forecasting Scenario comparison Trending Goal seeking Procedural calculations Custom Calculations What if testing Historic & Projected ratios (IRR,NPV) Industry standards comparison Loan capacity ratios Annual dynamic What-If analysis Best/Worst case scenarios (Sensitivity analysis) Comparison analysis - personnel, sales, advertising, income, cash flow, balance sheet Overdraft scenario Copyright 2009, Oracle and/or its affiliates. All rights reserved. 49

50 Quantify Risk and Uncertainty Conventional Single Point Scenarios Advanced Thinking in Ranges Only 3 possible outcomes Limited view of risk What are most important risk factors? What are the odds I ll miss the target? Which outcome is most likely? Full range of outcomes Illustrate probability of outcomes Immediate visibility into inherent risk True risk analysis for financial models Assign probability distributions to uncertain assumptions Run thousands of simulations Analyze range of outcomes and probabilities Assess model sensitivities Copyright 2009, Oracle and/or its affiliates. All rights reserved. 50

51 Efficient and Accurate Planning & Budgeting Supports 1,000s of users globally Improves user understanding of product dynamics Identify metrics based drivers of operational planning Utilize drivers in plans and forecasts Reinforces behaviors that lead to results Allows comparison between LOB Plug-in Workforce Planning module ideal for managing large employee populations into planning process

52 Increase Marketing Campaign ROI AXA Financial had $888.6 billion in assets under management as of December 31, AXA Financial is a member of the global AXA Group, a worldwide leader in financial protection and wealth management. Before Need to improve the effectiveness of financial advisor activities and increase ROI of marketing campaigns Necessity to transform customer interaction and analytics from departmental silo approach to more holistic model Desire to use information to minimize customer attrition and maximize share of wallet After Richer customer insight & segmentation; better targeting and higher campaign ROI More effective cross-sell and up-sell Greater marketing ROI, triggered by alerts monitoring customer events Re-connect with high value orphaned accounts; successful win-back programs Stronger relationships between advisors and customers, key metrics on advisor performance

53 Oracle Scorecard & Strategy Management Strategy Management & Goal Setting Integrated BI component KPIs as core metadata Thresholds, owners, history Auto-generated interactive analyses Linked objectives & initiatives Automatic detection KPI alerts triggered by thresholds Strategy visualization Strategy Maps and Trees Cause and Effects Watch lists Annotations & override All methodologies Balanced scorecard, six sigma, Baldrige

54 Meeting with different analysis needs With Who? Historic / Current Forward Looking / Modelling Executive Management Claim Policy Sales (Marketing) Policy Service Agents Revenue Performance Loss Ratio Analysis Recovery Performance Product Penetration Channel Performance Top Open Claims Claims Distribution by Status Claim Resolution Trends Claims Payment Lag by Region Quote to Buy Performance Top 10 Partners by Production New & Renewal Business Perf. Avg. Opportunity Follow-up Time Customer Satisfaction Service Requests Analysis Claim Element Resolution Time Total Delay in First Response Average Agent Production Top 10 Agents Performance Agent Satisfaction by Tier Future Revenue Performance and Profit & Loss Analysis by LOB / Product / Geography Market Share, Penetration, Strategic Planning Simulations Risk Exposed Financial Planning Predictive Analysis for trend Analyze trends at the claim rep, team, or company level What-if Analysis for expected claim related ratios Customer Portfolio & Profitability Product Performance Analysis Marketing Campaign Analysis Detailed Costing for current and future policy serving actions Accurate Cost Allocation for shared & indirect services Reducing avg.time for claim requests by providing detail analysis & modelling

55 Oracle Insurance Offerings Accelerate Planning Predictive & Detailed Analysis Revenue Forecasting Centralized Planning Rolling Forecast Executive Management Revenue Perf. and P&L by LOB / Product / Geography Predictive / What-if Analysis Detailed Costing Analysis Overall Financial & Business Performance Analysis Finance Sales & Distribution Sales & Revenue Analysis Fees & Commissions Analysis Sales Performance Analysis Risk Exposed Financial Planning Running different scenarios Risk Management Marketing Product Man. Customer and Portfolio & Profitability Product Performance Analysis Marketing Campaign Analysis

56 <Insert Picture Here> Customer Success Copyright 2009, Oracle and/or its affiliates. All rights reserved. 56

57 Oracle EPM in Life and P&C Insurance

58 Oracle EPM in Health Insurance

59 <Insert Picture Here> The Oracle Difference Copyright 2009, Oracle and/or its affiliates. All rights reserved. 59

60 Oracle Positioned in Leaders Quadrants Magic Quadrant for Business Intelligence Platforms, 2011 Magic Quadrant for CPM Suites, 2010 Magic Quadrant for Data Warehouse Database Management Systems, 2011 The Magic Quadrant is copyrighted 2011 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the "Leaders" quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. These Magic Quadrant graphics were published by Gartner, Inc. as part of larger research notes and should be evaluated in the context of the entire reports. The Gartner reports are available upon request from Oracle. Sources: Gartner, Inc., Magic Quadrant for Business Intelligence Platforms, 2011 by Rita L. Sallam, Bill Hostmann, James Richardson, John Hagerty. 27 January 2011 Gartner, Inc., Magic Quadrant for CPM Suites, 2010 by Nigel Rayner, Neil Chandler, John E. Van Decker, 25 January 2010 Gartner, Inc., Magic Quadrant for Data Warehouse Database Management Systems, 2011 by Donald Feinberg, Mark A. Beyer, 28 January 2011 Oracle Confidential - For Internal Use Only

61 The Oracle Difference Fulfill Obligations by Managing and Enforcing Policy 1 Hundreds of Pre-delivered Analytics 2 Enterprise GRC Platform Leader 1 3 Continuous Controls Monitoring Leader 2 Source: 1 Gartner Magic Quadrant for Enterprise GRC Platforms, Gartner Magic Quadrant for Continuous Controls Monitoring, 2010

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