KPMG s Insurance Practice

Transcription

1 Insurance Services Practice a Financial SERVICES KPMG s Insurance Practice Transforming the Industry kpmg.com

2 b Insurance Services Practice Our vision and strategy We are recognized as a leader in terms of the services we provide to insurers. This means driving ourselves to be the best in everything we do. Our strategy is to be a globally consistent organization with excellent people who have deep insurance industry knowledge and provide multidisciplinary capabilities. This approach helps our clients meet their expectations, creates opportunities for our people, and enables us to fulfill our responsibilities to the capital markets. Contents Transforming the insurance landscape 1 Introducing KPMG s insurance practice 2 Audit services 4 Tax services 5 Advisory services 7

3 Insurance Services Practice 1 Transforming the insurance landscape KPMG recognizes that today s economic environment is forcing insurers to rethink the way they conduct business. Volatile markets, emerging technologies, and a complex web of new regulations and compliance issues have brought financial services companies to a crossroads. Long gone are the days of simply collecting, investing, paying, and reporting. Today s insurance executives face complex market issues such as regulatory uncertainty, evolving governance and risk management frameworks, sustaining operational performance, and maintaining liquidity. KPMG s Insurance professionals know how to help clients transform today s uncertainty into potential opportunities. We view our insurance clients current challenges as possible breakthroughs that can transform their operations and create a sustainable advantage. We have accepted that change happens and business will never stop changing. We work with leading insurers to help them redirect these changes with the goal of creating answers to their most pressing business questions. We believe a differentiating factor in our approach to client service is the emphasis we place on clear and concise communication of complex business issues and our answers to them. We help our clients cut through the complexity. We look forward to working with you and having the opportunity to demonstrate the KPMG difference. Laura J. Hay KPMG, National Sector Leader, Insurance

4 2 Insurance Services Practice Introducing KPMG s insurance practice The largest provider of professional services to Financial Services companies globally, KPMG s Financial Services practice has long been recognized for its presence in and its commitment to the industry. Our dedicated Insurance professionals in the United States, and globally, are an integral part of the Financial Services team and this is what differentiates us in the market place. Insurance Network Partners Total U.S. Insurance 141 1,025 Global Insurance 513 7,293 Global Financial Services 2,433 34,624 KPMG s national Insurance practice includes more than 1,000 professionals located in 87 offices throughout the United States. Our national practice is complemented by a global network of more than 7,000 Insurance professionals a network that is vital when our clients require cross-border support. Key marketplaces extend across the globe, with Insurance professionals located in 146 countries on six continents. Cutting through complexity Our knowledge in the Insurance industry goes beyond technical qualifications to a deep understanding of the issues transforming the insurance landscape, coupled with a strong commitment to delivering high-quality, cost-effective service that focuses on our clients business. We believe a differentiating factor in our approach is the emphasis we place on clear and concise communication of complex business issues and our answers to cutting through complexity. Our clients are far-reaching, spanning life and property and casualty (P&C) insurers to reinsurance and captive companies, health care insurers and providers, and governmental agencies. We are focused on meaningful contributions to the sector as we assist our clients in transforming the insurance landscape.

5 Insurance Services Practice 3 Adding value for our clients We recognize that an insurers financial decisions are being scrutinized as never before, that assets are moving around the globe at high speed, and that large and small organizations alike can be subject to influence by events that ripple across the world. We turn our knowledge into value. This begins with taking a fresh look at insurance busineses drivers and exploring how the future insurance landscape would look for our clients. We are proud that our Insurance practice has provided audit, tax, and advisory services to more than 67 percent of the FORTUNE 1000 insurance companies. This allows us to bring value to you. Audit Market Share FORTUNE 1000 Insurance Companies 30% 19% 27% 24% Key KPMG E&Y DT PwC We share our clients objectives of credibility and transparency in financial reporting and the insurance industry knows we are committed to delivering independent audit reports. Thus, we are proud of our leading position in the number of insurance company audits. KPMG by the numbers Audits 24 of the top 100 P&C insurance companies, as rated by A.M. Best Audits 22 of the top 100 L&H insurance companies, as rated by A.M. Best Audits 23 percent of the top 1,200 global insurers Audits 32 percent of the FORTUNE 1000 non-life insurance companies Our services are focused on turning knowledge into value for the benefit of our clients we serve. The types of services we offer include: Product Description Audit Tax Services Advisory Services Risk Consulting Advisory Services Business Consulting Advisory Services Transactions and Restructuring Advisory Services Actuarial Service Offerings Financial Statement Audit Federal Tax Services Economic & Valuation Services International Corporate Services International Executive Services Mergers & Acquisitions Tax State and Local Tax Tax Dispute Resolution Services Tax Transformation and Outsourcing Services Washington National Tax Enterprise Risk Management (ERM) Assessment and Implementation Forensic Services Governance, Risk, and Compliance Internal Audit Sourcing Internal Controls Review, Sarbanes-Oxley 404 and Model Audit Rule Compliance Assistance IT Attestation Managing Risk and Capital Regulatory Compliance Practice Solvency Business Intelligence Change Management Climate Change & Sustainability Customer and Producer Support Finance Strategy, Integration, and Transformation Financial Governance Technologies HR Function Optimization Insurance Back Office Transformation Insurance New Business Process Transformation IT Enabled Transformation IT Strategy & Performance Quality Close and Reporting Sales and Customer Effectiveness Shared Services and Outsourcing Talent Development Accounting Advisory Services Support Accounting Change Services Integration Advisory Operational Restructuring Actuarial Modeling Model Risk and Control Model Validation Services Pricing and Product Development Reserve Review and Analysis

6 4 Insurance Services Practice Audit services Our audit work is at the core of our services as a firm. We serve our insurance audit clients as part of a multidisciplinary team that develops an understanding of the company s products and risks, and how those translate into balances reported as part of their financial statements. Our risk-based approach works to target our audits in the most effective manner to drive an appropriate review from a risk perspective. KPMG Insurance professionals serve on our member firms global audit clients to help achieve global consistency as we perform our local audit work. A multidisciplinary audit team Our multidisciplinary approach to audit combines insurance industry and subject matter professionals who have the knowledge, skills, and experience to perform the engagement. Our ability to deliver a high-quality audit is based on our team s existing understanding of your business processes, accounting policies, internal controls, and financial reporting issues specific to the insurance sector and to your specific business. Our subject matter professionals include actuarial, tax, information risk management, forensic, and valuation specialists. Our risk-based audit approach KPMG s top-down, risk-based audit approach effectively delivers a financial statement audit using KPMG s Audit Methodology (KAM) to ensure that our audits comply with changing regulations and professional standards. This methodology facilitates and enhances audit quality. We develop objectives and perform audit procedures throughout the audit work flow to obtain sufficient and appropriate audit evidence to form an opinion. As part of this risk-based approach, we develop an enterprise risk profile for our client and help ensure that our audit plan adequately reflects consideration of those risks. We organize an audit team to properly address these risks, including experienced partners and managers who focus on each area of risk. We then tailor our audit approach around a risk assessment executed by the audit team. In addition, KPMG will meet periodically with your risk-focused board committees to discuss and share views on emerging risks applicable to your company. Communication is central A main component of our audit approach is a strong emphasis on professional judgment. Our knowledge of professional standards coupled with our prior experience forms a basis to make thoughtful decisions that reflect careful consideration of available information that is communicated to our clients.

7 Insurance Services Practice 5 Tax services KPMG is a leader in providing tax services to the insurance industry because we focus on understanding the relationship between the tax laws and the accounting, regulatory, and business environment in which the industry exists. By combining industry insight with technical skills, we assist insurers with business tax issues related to international, federal, state, and local tax planning as well as legislative and regulatory concerns. Federal Tax Services Our Federal Tax practice is a resource for insurance clients that require assistance complying with the latest tax laws and regulations affecting insurers. With a team of tax professionals specializing in the insurance industry, we bring the experience and commitment necessary to provide a range of tax consulting and tax compliance services. We assist our clients with tax return compliance, income tax accounting, consulting on the unique tax laws applicable to insurance companies, managing examinations by the Internal Revenue Service, obtaining private letter rulings from the IRS Office of Chief Counsel, and other tax consulting services. Our Federal Tax professionals provide extensive tax training to the insurance industry. Economic & Valuation Services As the global economy expands into every corner of the world, many national fiscal authorities are seeking more effective ways to protect their tax bases. This has translated into increased challenges for multinational organizations. From detailed transfer pricing regulations and stricter documentation requirements to sophisticated audit practices and significant penalties for noncompliance, global companies are looking for advice in dealing with the increased regulation and higher scrutiny. Transfer pricing professionals in KPMG s Economic and Valuation Services (EVS) practice, working with transfer pricing professionals from KPMG member firms around the world, can assist multinational insurers and reinsurers in making forwardthinking transfer pricing decisions. We can help to effectively and efficiently manage your transfer pricing program from planning, compliance and documentation, implementation, to dispute resolution. In addition, professionals in the EVS practice that focus on valuations and economic services can help with advanced analytical services to support business strategy, operational changes, and financial and tax planning compliance. Our valuation services encompass valuing entire businesses, subsidiaries, joint ventures, and equity interests, as well as specific assets such as investment portfolios, insurance in force, and specific blocks of business. And EVS professionals with specialized knowledge and practical experience in economics, policy analysis, and statistics can provide microeconomic studies and advanced quantitative and statistical analysis to support a variety of business needs. International Corporate Services Multinational insurers are faced with identifying appropriate tax planning opportunities that align with their strategic business objectives and also help strengthen their tax positions across borders. These organizations are challenged by an increasingly complex tax reporting environment, as evidenced by the adoption of FATCA by the United States. Foreign tax credit planning, cross-border financing planning, capital planning, and international tax compliance are just some of the other tax areas that multinational insurers may need to address. KPMG s international insurance tax professionals provide a variety of services to outbound and inbound clients that include providing assistance with establishing overseas operations, captive formation and operation, Subpart F planning, cross-broader financing, foreign tax credit analysis, and permanent establishment analysis. KPMG member firms can assist in identifying alternative tax planning approaches to business opportunities and challenges an advantage that can translate into enhanced global tax efficiency. International Executive Services For many global organizations, the pressure to compete means increasing the size, scope, and complexity of their global workforce. Managing the demands involved in growing a global workforce can use up significant resources as it involves reporting, withholding, and regulatory compliance issues in each country where you have an expatriate population. KPMG s International Executive Services (IES) professionals are dedicated to helping global companies better manage their global workforce. In addition to providing extensive global tax compliance and advisory services, we support our clients assignment programs through a global network of specialized professionals and a diverse offering of technology-based applications. Our approach includes services in the areas of international tax compliance, international human resources, assignment management services, global equity tax, international social security, and payroll and employment tax. Mergers and Acquisitions Tax In the global arena where tax intelligence is crucial to the success of a deal companies need to focus on material exposures and not lose sight of transaction goals. KPMG member firm professionals combine international perspective with local knowledge to help insurers capture the benefits of a transaction. From the planning of the initial deal structure to post-transaction integration and disposition of unwanted assets, KPMG member firms can help identify tax efficiencies that can impact the bottom line. Member firm professionals are commercially minded, deal-hardened, and possess tax intelligence. Our work spans the early identification of potential hurdles to opportunities to the reported results and future cash flows of a proposed

8 6 Insurance Services Practice structure. We know how to identify and help manage the material tax exposures in a transaction. Our core offerings include buyer and vendor tax due diligence, acquisition tax planning, post merger integration planning, cross-border transaction cost analysis, tax opinions, and bankruptcy workouts. State and Local Tax Keeping current on tax developments, which are taking place in every state where your company does business, is important for you to stay competitive and meet long-term objectives. In addition, maintaining compliance while being faced with aggressive state tax auditors in the current environment can consume a large number of your resources who need to focus on the compliance function and delivery of timely tax returns. KPMG s State and Local Tax professionals can assist insurance companies with state and local tax compliance, controversy, consulting, and planning. The professionals in our State Tax Resource Network continually monitor the legislative, judicial, and regulatory state tax landscape to alert you to new challenges and opportunities. We advise clients in the areas of income and franchise tax, sales and transaction tax, value-added tax, credits and incentives, and unclaimed property enabling insurance companies to redirect their resources from clerical activities to more value-added activities. Tax Dispute Resolution Services The rising pressure on various tax authorities to generate revenue has resulted in a growing number of tax return examinations, as well as increased audit activity across all taxing jurisdictions and types of tax. For any business facing a potential or active tax examination, appropriate strategies for response and compliance are critical. KPMG s Tax Dispute Resolution (TDR) Services network can help insurance companies prevent, prepare for, and/or respond to challenges by the varying tax authorities. The TDR network is a national team of professionals from all areas of tax, who assist clients in identifying, managing, and mitigating potential tax risks and exposures. Our goal is to work with clients to prevent disputes before they arise and to successfully resolve those matters that ultimately are subject to challenge by the taxing authorities. Together with the local KPMG tax team, we can conduct a thorough review of your situation and positions to fully understand the nature of the issue, analyze all relevant information, and work closely with you to determine the most suitable approach to a successful resolution. Tax Transformation and Outsourcing Services For insurers whose tax function faces ongoing challenges to improve and sustain performance, manage risk, and deliver value, KPMG s Tax Transformation and Outsourcing professionals have extensive experience in tax, processes, operations, technology, organization, benchmarking, and change management to help drive the performance and impact of the tax function. We also help insurers who have limited resources to effectively manage their tax departments with our Outsourcing and Co-sourcing teams. They help leverage people and technology to provide the tools and resources needed to achieve long-term sustainable value. Washington National Tax Tax laws and policies seem to change almost daily. Governments confront enormous budgetary and fiscal pressures and a rapidly evolving global marketplace. To compete successfully, businesses must stay on top of breaking developments and effectively manage their global tax risk. Adapting to change and managing risk requires information and insight. You need to understand the changing landscape and how it may affect your organization. KPMG LLP s Washington National Tax office is the technical core of KPMG s tax practice in the United States. It is staffed with approximately 170 tax professionals, many of whom draw upon their prior job experience with the Internal Revenue Service, the U.S. Treasury Department, Congress, and the U.S. Tax Court. This experience, coupled with regular contact with government officials at the national, state and local levels, helps us provide clients with an informed perspective on emerging trends and regulatory actions that may affect their businesses.

9 Insurance Services Practice 7 Advisory services KPMG s Advisory Services practice focuses first on fundamental business issues managing risk, increasing revenues, controlling costs that all insurance companies must address in order to flourish. With an industry focus on insurance, KPMG helps to identify and manage risks, including the risks inherent in business processes and technology systems that support business objectives, and provide the information needed to help meet your strategic and financial goals. The end result often brings transformative changes to our client s operations. To survive and thrive, insurance companies are looking to transform at both the functional and enterprise level. What does it mean for Advisory? Transformation challenges will vary with client needs, likely calling for a different combination of Advisory services. At KPMG, we start with financial reporting because producing financial statements is a primary focus for insurance industry finance and accounting executives while we also recognize their need to balance their time and shift their focus. Today s finance and accounting executives must be prepared to capitalize on the growth opportunities. As companies evolve, linking, risk and performance management will ultimately be core to future success, Certain advisory services described herein are not permissible to KPMG audit clients and their affiliates. Risk Consulting Enterprise Risk Management (ERM) Assessment and Implementation As insurers pursue more profitable and competitive operations, KPMG can help implement sustainable ERM systems. Drawing on our extensive experience working with boards of directors and management teams, our industry teams help our clients develop predictive capabilities that can react to risks and respond in a manner that enhances business value and performance. Our industry-specific ERM capabilities apply to enterprise risk assessments; evaluation of the current state of risk management practices; development of a practical road map to achieve the desired risk management end-state, knowledge transfer, and training. In addition, as insurers worldwide address their stakeholders new demands to enhance how they manage risks, we have noted insurers giving ERM new consideration. Forensic Services KPMG can assist insurance companies in preventing, detecting, and investigating fraud and misconduct, as well as avoiding and resolving disputes. Our professionals draw upon extensive experience in forensic accounting, law enforcement, fraud and misconduct control assessments, regulatory enforcement, legal damage quantification and analysis, expert witness testimony, international arbitration, asset tracing, information management, computer forensics, e-discovery, and forensic data analysis. This background and experience enables us to help discover the facts underlying concerns about fraud and misconduct, as well as assist our clients in assessing and mitigating their vulnerabilities to such activities. We also deliver a broad range of services to help prevent and resolve commercial disputes, including the assessment of damages; the resolutions of accounting, audit, and finance-related issues; and expert witness services. Governance, Risk and Compliance The global economic crisis proved in some cases that companies did not consistently take a strategic and coordinated approach to risk management. Coming out of the crisis, insurance companies are pressured to be more proactive and rigorous in how they manage risks and to provide assurance to internal and external stakeholders about their risk management effectiveness. Insurers that can clearly articulate and quantify the risks they face and their likely impact on performance will ultimately make better business decisions. A detailed Governance, Risk and Compliance (GRC) approach, enabled by technology, can drive new compliance and performance capabilities and new organizational resilience. KPMG helps insurers develop a wide-ranging vision and approach for their organizations multiple GRC processes. Our teams are multidisciplinary, drawing from multiple service lines as needed to feature professionals experienced in financial and operational internal auditing, information technology, data analytics, fraud analytics and risk assessment, finance management, treasury and financial instruments, tax, and supply chain, among others. This multidisciplinary teaming approach is again augmented with an insurance focus to deliver enhanced value. Internal Audit Sourcing Achieving leading internal audit capabilities requires significant investment in skilled resources, methods, training, career paths, and technical infrastructure. Maintaining those capabilities requires sustained investment during both good and challenging economic times. KPMG serves a variety of insurance companies, both nationally and globally, who are seeking to improve internal audit quality and oversight, increase value while optimizing costs, and enhance risk and controls management. Using a multidisciplinary team structure, KPMG can tap financial and operational auditors, IT auditors, and subject matter resources as needs are identified in the risk assessment and audit plan.

10 8 Insurance Services Practice Internal Controls Review, Sarbanes-Oxley 404, and Model Audit Rule Compliance Assistance Since the insurance industry is in the business of accepting and managing risks, sophisticated systems are needed to measure and monitor its complex risks and exposures. But the concern doesn t stop there. The Sarbanes-Oxley Act has significantly raised the bar for many insurance companies and their executives. The Model Audit Rule (MAR) has introduced similar requirements on the statutory front. KPMG has been heavily involved in reviewing significant amounts of Sarbanes-Oxley and, more recently, MAR documentation. With an insurance lens, we assist in reviewing the procedural and controls documentation, assist in the development of documentation, perform gap analyses, provide remediation assistance, and work with company management to prepare governance procedures around risks and controls. KPMG is focused not only on compliance but also on helping you extract enhanced value from the process by effecting real and lasting improvement of the internal control environment. IT Attestation With insurers increasingly outsourcing technology and business processes to service organizations, KPMG understands that insurers need to have confidence in their service providers. Although, the technology and processes are outsourced, the risk is not. Our IT attestation professionals provide assistance when insurance companies need assurance on customer facing systems in order to help satisfy the risk and compliance needs of their customers. With the retirement of the SAS 70 report, there are new Service Organization Control (SOC) reporting options available. In the past, the SAS 70 report was intended to assist service providers customers and their auditors specifically in the context of internal control over financial reporting. Now, three types of SOC reports have been defined to help service providers meet a broader set of user needs such as addressing the security and availability concerns related to the cloud. Managing Risk and Capital Recognizing the inherent link between risk and performance management, we work with senior management to evaluate an insurance company s risk appetite, understand and quantify risks and interdependencies, develop quantitative economic capital models or assess our clients already existing economic capital models, evaluate the most efficient use of capital and surplus (including product development considerations and reinsurance and capital markets approaches), and develop plans for helping to optimize exposures to risk while meeting the objectives as outlined in the risk profile. Our goal is to embed risk in the business while seeking opportunities to deliver value and advantage beyond quantification and monitoring alone. Regulatory Compliance Practice KPMG s Insurance Regulatory Compliance practice assists its clients in assessing and controlling regulatory risk. Our objective is to help insurance companies create a positive culture of compliance, improve their approach to meeting regulatory obligations, and implement programs that are both effective and efficient over the long term. We do this using, as a base, our proprietary Regulatory Risk Framework. This framework was developed in concert with our international member firms and professionals that serve other financial institutions that are highly regulated, such as broker-dealers and banking organizations. Our professionals include former regulators and compliance professionals, and as such, have in-depth knowledge of the challenges companies face and their concerns and expectations. Solvency Solvency leading practices around capital management is a hot topic in the industry. Solvency II (SII) is the EEA manifestation of the regulator-driven trend. Other country regulatory regimes, such as Bermuda and Mexico, are also moving towards SII. The U.S. insurance industry is impacted by these movements on several fronts global insurers with European operations (whether U.S., or European parent) are impacted, ratings agencies are interested and asking key questions, competitively it may result in certain advantages for certain companies, and finally, some of the components of SII have been considered by many to be leading practice. Whatever the trigger, U.S. insurance companies are increasingly interested in understanding SII implications for their own company. KPMG s global footprint and connectivity means that we have been deeply involved in leadership on this topic and on implementations both in the U.S. and across the globe. We have assisted insurance companies with understanding the quantitative implications, analyzing the risk management and governance frameworks, and assisting with the everincreasing disclosures requirements. Our services include high-level gap analyses, more detailed analyses of people, process data, technology, and analytics as well as deep dive implementation assistance. Running a large project such as these implementations often involves a significant amount of project management services as well. Ultimately, our goal is to help insurance companies embed their new frameworks into the operating model such that risk and financial reporting are more closely linked in a business-as-usual manner.

11 Insurance Services Practice 9 Business Consulting Business Intelligence Business Intelligence is the capacity to acquire, correlate, and transform information into insightful and actionable information through analytics, enabling an insurance organization and its business partners to make better, timelier decisions. We view business intelligence beyond technology, and so it can t be solved by technology alone. Business intelligence empowers the right people to receive the right information, at the right time, allowing them to make the right decision. It s critical, therefore, to shift the focus beyond the efficient delivery of information a technology-centric tactical approach to accuracy in insight a strategic approach that places greater emphasis on the information itself. The approach recognizes, filters, and extracts value from financial and operational information to make better business decisions. We expand the focus of business intelligence beyond reporting and dashboards to a broader capability that allows insurance companies the ability to capitalize on their information, apply insight to respond to marketplace issues, and identify competitive advantage. This can be achieved when our clients have confidence in the underlying inputs and assumptions. Change Management It has been said that the only constant is change, and given today s market realities, insurers have little choice but to embrace change in order to prosper/realize benefit. Successful change management proactively mitigates organization risk in the pursuit of benefits realization. Whether the change is focused on a specific function or at the company-wide level, changes in corporate strategy, processes, systems, and technology require that people perform and behave differently. The change management team helps prepare insurers and their employees for change and also helps navigate the change process to sustain transformation initiatives. We focus on organization risk and readiness, stakeholder management and strategic communication, and job impact and workforce transition. Climate Change and Sustainability Climate change and sustainability issues have received focus in the boardroom. Insurers have begun to address sustainability as a core strategic element of their business plans. They realize that by embracing sustainability, they can achieve hard-dollar reductions in energy costs, improved relationship with customers and suppliers, and more efficient use of resources, especially water. Many insurers have found that a focus on sustainability has stimulated innovation in their companies. KPMG assists insurers in better understanding the complex and evolving policy, regulatory, and business environment risks and opportunities related to climate change and sustainability to help them capitalize on the resultant commercial opportunities. Customer and Producer Support Insurance customers and producers are increasingly demanding a better interaction experience from their insurer, whether it is through the call center, internet, or through mobile devices. Traditional insurance customer support has at times been proven inefficient and does not provide the experience customer are looking for today. KPMG brings a multidisciplinary team of industry, process improvement, and technology skills together to help our customers address these issues, improving bottom line cost while increasing customer satisfaction. Finance Strategy, Integration, and Transformation When transactions are executed and finance functions must be integrated or combined, the process often involves development of new processes and controls, the implementation of new business models, and/or organizational restructuring to achieve business objectives and performance results. A clear strategy enables an insurer s finance organization to align with the business strategy to provide more value efficiently. By balancing cost optimization, delivering business insights, and by improving the governance process, an effective strategic plan can help insurance companies focus and prioritize their initiatives in improving the value provided and potentially reducing the overall costs of finance, without jeopardizing the control environment. KPMG knows that the focus of an insurance company s finance organization has evolved. We see the current focus of turning data into information, instituting appropriate governance and organization and leveraging the right technology. This means that insurers are looking to the next generation of initiatives that can both reduce overhead costs and be value-adding at the same time.

12 10 Insurance Services Practice Financial Governance Technologies More and more insurers are looking for tools that automate and digitize the record-to-report business process components. Financial governance technologies provide the foundation to establish the monitoring, visibility, and benchmarking necessary to deliver value, manage resources, control risk, measure performance, and capture assurance in an integrated platform. With a deep understanding of the financial close process and an objective view on software systems, KPMG can help insurers capture a better sense of their business in an integrated platform. HR Function Optimization KPMG recognizes that insurance companies human resources functions are being pressured to deliver marked improvement at both the strategic and operational levels. Too often, human resources finds itself challenged with aspiring to a good to great vision. KPMG can assist insurers to better leverage their human resources in support of their business strategy by building and sustaining an efficient and effective human resources organization. KPMG takes a holistic view of the human resources organization at insurance companies, including strategy, process, technology, structure, skills, governance, and performance measures. Our goal is to identify areas for improvement and optimization and to deliver value to the broader company. Insurance Back-Office Transformation KPMG is helping both life and P&C insurers update their back office operations with a view towards improving business flexibility and product time to market while significantly decreasing bottom-line costs. Approaches include policy administration system rationalization and replacement, insurance process transformation, and product development. KPMG also leverages technical experience in business process management (BPM), enterprise content management, project and program management (3PM), and testing to implement these approaches. Insurance New Business Process Transformation KPMG believes that there is a significant opportunity for our insurance customers to streamline and automate their new business processes to improve customer conversion, promote cross-selling, and improve process consistency and reporting. We focus on the entire process from quote, bind and issue, as well as underwriting, and leverage business process management, document management, business analytics and rules processing technologies to address our customer s business goals. IT Enabled Transformation The ongoing challenge to do more with less has made utilizing technology as a business advantage more critical than ever for insurers. Yet, with the multitude of technology options available, the pressure to achieve cost efficiencies and the implicit mandate to deliver business value at every possible turn often requires specific assistance to navigate the best way forward. KPMG has helped insurers enhance their use of enterprise-wide business applications. With an insurance industry lens, we provide assistance throughout the life cycle of the system s implementation, commencing with the vision, strategy, and roadmap, based upon the business needs, through postimplementation stabilization and ongoing optimization activities. Our insurance industry team has experience in ERP solutions such as Oracle, PeopleSoft and SAP. IT Strategy and Performance Aligning IT capability with an insurance company s strategic and financial objectives is a vital aspect of improving the performance of IT investment and to effectively managing IT. By understanding the distinct business needs of insurance companies, along with leveraging next-generation enabling technologies, such as cloud computing, KPMG advises CIOs and IT organizations on IT strategy and business alignment, IT governance, people and change, providers and sourcing, applications and development, technology infrastructure and operations, and risk and compliance. Quality Close and Reporting KPMG assists both large and small insurance companies in addressing opportunities for improvements in people, processes, analyses, and technologies through a detailed review of the financial reporting close processes and financial planning and budgeting processes. Improving the financial close and reporting process may enhance value and controls within the finance function and help achieve sustainable improvements in the timeliness of the closing process and hence the quality of reported data. As part of our service, we work with insurance companies in developing repeatable and sustainable close and reporting process for internal and external reporting. The approach involves helping conduct an analysis of the current close and reporting process, developing and analyzing conceptual design, selecting a future-state design, and potentially enabling technology, planning, and piloting its implementation, and conducting a broad-based rollout as well as ongoing monitoring and governance. Sales and Customer Effectiveness As insurance companies undergo transition through the economic downturn, growth remains a key objective, either organic or inorganic. KPMG provides a detailed approach to customer-driven initiatives. With a focus on customer analytics and profitability, as well as sales tactics and marketing, KPMG supports nearly every growth strategy at an insurance company assisting in the development of a marketing strategy, designing economic analysis, and aligning sales and services with current market demands.

13 Insurance Services Practice 11 Shared Services and Outsourcing (SSOA) KPMG s SSOA practice has a respected reputation as one of the world s leaders in shared services and outsourcing advisory services. KPMG supports insurers seeking to continually improve major support services and capture synergies across multiple function finance, purchasing, HR, IT, facilities, etc. We provide a framework, Extended Global Enterprise (EGE), allowing insurance companies looking to drive large-scale change in their business models as they balance increasing complexity in expanding geographies, dynamic technologies, and cost optimization. Using EGE, insurance companies have access to a global network of capabilities and a pool of configurable resources that can be rapidly provisioned and released on demand to meet ever-changing market conditions and business objectives. We have helped clients achieve significant cost savings and process improvement through internal transformation, shared services and outsourcing. Additionally, we have experience in helping design and manage IT and business process improvement projects, including technologies based in a cloud or SaaS architecture. Talent Development Insurance companies dedicate considerable resources to finding, deploying, and cultivating their people, with good reason. Fielding exceptional talent while instilling organizational values and developing leadership competencies can make the difference in outperforming the competition. Smart decision on hiring, promoting, and retaining talent can make the difference between a brand that draws high-caliber talent and an insurance company with jobs to be had. KPMG helps insurers strengthen their most valuable asset, its people. The key focus is on the identification, recruitment, development, and retention of high-performing and high-potential people. Transactions and Restructuring KPMG Transaction Services supports insurance companies throughout the entire transaction life cycle. From identification and initial assessment of the strategic value of an acquisition or disposal through due diligence and valuation of the proposed target, assisting negotiations with the seller or buyer and the subsequent integration or separation of the business, our industry professionals can work to help achieve the value sought from your deal. We will work to execute transactions smoothly and help minimize the risks of subsequent disputation. KPMG Corporate Finance helps insurers to develop the appropriate capital strategies and to put funding structures in place, helping to ensure they remain relevant as conditions change is crucial. Our debt advisory professionals can assist with strategic debt structuring advice, assessment of alternative funding options and markets as well as assistance with the financing process including debt sizing, market selection, negotiation and documentation. For an insurance company that is underperforming, our restructuring professionals work alongside management, stakeholders, and lenders to help make real improvements

14 12 Insurance Services Practice to cash flow, profit and loss, and the corporate balance sheet. We take a hands-on approach to helping stabilize the business and identify new opportunities to make sustainable changes to strategy, operations, and finances. We differentiate ourselves by leveraging deep insurance industry experience and multifunctional skills on a global scale through a tailored proposition specific to every transaction and restructuring project. Accounting Advisory Services Support KPMG s Accounting Advisory Services team provides accounting advice, interpretation, and transactional support for mergers, acquisitions, financial asset transfers, divestitures, investments, financings, leasing, and other complex transactions. We have extensive experience in both U.S. GAAP and International Financial Reporting Standards as well as in the insurance industry. We assist insurance companies by performing technical accounting research, monitoring the developments of open projects of the IASB and FASB, benchmarking current and evolving industry practice, and helping insurers to develop their interpretations of accounting guidance and analyzing the implications and financial reporting ramifications of potential transactions. We also work with insurers to review and update their accounting policy manuals and implementation guidance as a result of new standards, mergers, divestitures or other transactions. Accounting Change Services The basis of accounting for insurance companies is rapidly changing. The FASB and IASB intend to issue standards on insurance contracts and financial instruments within a short time frame. Furthermore, U.S. insurers may be impacted by the mandatory conversion to IFRS for their affiliates in many countries around the world. The SEC is still considering its proposal to potentially adopt IFRS in the United States. Adapting to changes of this scope is more than an accounting exercise. For more than a decade, KPMG has delivered accounting conversion and implementation projects to more than 1,400 clients worldwide. Leveraging a wealth of practical conversion experience, a detailed and adaptable approach, and a robust infrastructure that drives consistency and connectivity, KPMG is ready to assist you to assess the changing accounting and reporting changes as well as the potential impacts of those changes on your technology, systems, processes, and people. We can also assist you to design and implement approaches to the issues arising from these accounting changes. Our conversion methodology draws upon KPMG s global, implementation experience with IFRS adoption projects. Integration Advisory For a transaction to deliver on its strategic goals, the integration process must be highly proactive and focus the merging organizations on the specific operational tasks needed to deliver synergies and other value objectives. Our approach is designed to assist in planning for and implementing all aspects of integration-related activity including establishing the integration goals, infrastructure, tools, templates and methodologies that result in effective functional asset and capability integration. Operational Restructuring Many insurance companies, regardless of their financial health, are looking to their core operations to drive growth, improve earnings, and achieve improved operating efficiencies to improve bottom-line performance. KPMG helps insurers who need advisers to bring not only the customary financial toolkits, but also advisers who possess relevant operational knowledge of insurance organizations and strategic skills to drive lasting margin recovery and improvements. KPMG works to deliver services as either part of a broad restructuring effort or as part of a more discrete exercise focused on specific elements of underperformance such as claims processing, working capital, etc. Following the identification and selection of improvement initiatives, we work with line management to implement changes, driving savings or efficiencies. Actuarial Actuarial Modeling Actuarial models are central for risk management, underwriting and pricing, reserve valuation, cash flow testing, business planning, ERM/economic capital and profitability analyses at insurance companies. KPMG assists insurance companies in developing new models, modifying existing ones, and reviewing and interpreting results. We have hands-on knowledge of a variety of commercially available software packages. Our actuaries are highly experienced in reserving methodologies and reserve variability, asset and liability management, appraisals, embedded value calculations, financial planning/budgeting and pricing/product development. Model Risk and Control Models have become an increasingly important means of evaluating, analyzing, and reporting key business information at most large insurance organizations. Substantial risks are associated with the use of models (which includes Excel spreadsheets and other more complex tools). In many cases, model risks have begun to outpace the infrastructure that organizations have in place to manage those risks. Leading insurers need to make sure they have appropriate control over their models as well as a robust process for assessing and managing risk. KPMG has developed a proprietary frameworks, which assists Insurance companies in assessing the model risk and controls inherent in their business and ultimately in developing a model governance process that encompasses the full complement of models from decision support to financial to risk management.

15 Insurance Services Practice 13 Model Validation Services Recognizing that insurance companies desire to have a high level of confidence in the results coming from their models, KPMG has developed a proprietary framework to assist companies in the performance of model validation activities. The objectives of a validation exercise include determination and documentation of the understanding of the model being reviewed, the data and assumptions used in the model, the theory and applicability of the model processing component, and the information generated by the model. These services may be performed on a stand-alone basis or in conjunction with a model risk and control project. Pricing and Product Development Approaches to pricing insurance risk have changed significantly in recent years. Insurers are combining more refined statistical methods, improved technology and computing power, and widespread real-time availability of data into their pricing models, creating new and different risks for managements to address. KPMG has experience in evaluating pricing models with respect to model parameterization and methodology, model risks, and overall effectiveness of the underwriting and pricing regimes. We assess coordination of pricing and product development within the context of a company s risk management framework and the tools and approaches used for ongoing monitoring. We regularly benchmark such models against insurance industry leading practices while also considering regulatory and rating agency concerns. Reserve Review and Analysis Reserve valuation is one of the most critical areas of insurance company financial reporting. Reserve reviews and analyses is a core competency of KPMG s Insurance practice Reviews are performed as part of the audit procedures in a financial statement audit or on stand-alone basis as an advisory service. Our procedures include all aspects of the loss and loss adjustment expense reserve, unearned premium reserve, and DAC/VOBA calculations. We regularly provide objective, third-party analysis of clients reserves. We also review processes, critically assessing key analytics, performing sample calculations, and reviewing relevant accounting and actuarial standard decisions and calculations. In addition to performing these reviews, KPMG also advises insurers on their implementations of new standards. Reviews performed include comparisons to company policies, exposure to risks underwritten, consideration of changes in the claims environment, applicable laws and regulations, and leading industry practice. Our solid insurance industry experience, coupled with our breadth of clients, play a critical role in delivering technical insights and meaningful industry perspectives.

16 Contact us For more information about this publication or about KPMG s Insurance Practice, please contact the following: Laura J. Hay National Sector Leader Insurance T: E: ljhay@kpmg.com Tom Daugherty National Insurance Client Leader T: E: tdaugherty@kpmg.com Ellen Hancock National Insurance Audit Leader T: E: ehancock@kpmg.com Craig Pichette National Insurance Tax Leader T: E: cpichette@kpmg.com Sue Townsen National Advisory Leader Insurance T: E: stownsen@kpmg.com David White National Actuarial Leader T: E: dlwhite@kpmg.com Matt Smyth Global Leader, Solvency and U.S. Leader Insurance Risk & Performance T: E: matthewsmyth@kpmg.com Rosalie S. Collado National Marketing Director Insurance T: E: rcollado@kpmg.com kpmg.com 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name, logo and cutting through