Actuarial modeling

The AXIS system supports the initial design and development of new life insurance and annuity products or the redesign of existing products by:

• Specifying detailed issue age and risk class specific product features by generating or importing product benefits values
  

• Exploring distribution compensation options including commission and bonus structures

• Defining applicable reserve methods and assumptions for multiple valuation purposes

• Defining regulatory or internal required capital targets

• Defining expected taxation rates and assumptions

• Simulating sales illustrations using projected premiums and benefits

• Projecting resulting earnings on multiple bases
  

• Calculating multiple profitability and return on capital metrics

• Solving for target values of any of the above by iterative adjustments

Based on full seriatim in force business data files for a single valuation date, the AXIS system can transform and allocate policy data to AXIS model definition and control objects created by the user, and calculate up to eight independent reserve calculations in a single run, including:

• Local statutory reserve calculations

Solvency II best estimate liability calculations

• Tax reserves specified by tax authority

• Public Reporting local or international standards (e,g, US GAAP and IFRS)

• Economic balance sheets

• Embedded values reflecting anticipated release of future profits

• The value of options and guarantees (TVOG) using stochastic methods

• Capital requirements

The AXIS system can also accept multiple in force business files and multiple assumption bases, trace the movement of business and reserves through the current reporting period and generate detailed granular data files needed to support advanced accounting frameworks such as IFRS 17 and US GAAP LDTI.

The AXIS solution can import data files of investments in force at a starting date and then generate the following Financial Projection details on a monthly, quarterly or annual basis for up to 100 years:

• Detailed cashflows such as bond coupons, mortgage and rental payments, dividends, capital repayments, administration fees and expenses
  

• Asset movements arising from maturities, defaults, sales, prepayments, and calls

• Earnings and income statement details such as earned income, amortization of realized and unrealized gains and losses (including IMR and AVR), amortization of premium and discount, and gain/loss on defaults

• Balance sheet values and in-force statistics, including par values, book values, market values, accrued income, C1 required surplus, and so on

• Multiple asset accounting bases available

The AXIS system links to the Moody's structured cashflow engine for modeling structured finance assets such as residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), asset-backed securities (ABS), or collateralized mortgage/debt/loan obligations (CMO/CDO/CLO).

Supports financial reporting requirements for a vast array of purposes and regulatory risk-based capital calculations (Solvency II, C-ROSS, NAIC, Hong Kong RBC). Offering a complete and seamless integration of modeling functionality that can be applied to a single policy, a product or product group, a line of business, or entity level.

The AXIS system models in-force portfolios and new business sales plans, required for the calculations of various global capital frameworks and their projection over time.

Where stochastic calculations are needed, the AXIS system can handle them at time 0, and nested into projections at multiple levels.

Based on the starting valuation of a detailed seriatim portfolio of in force business, and actual experience assumptions for investments, mortality, lapse and expense, the AXIS system can be used for:

• Analysis of the impact of margins with reserves, by assumption
  

• Movement analysis reports (policy count, sums insured. reserves, etc.) on a planned or actual basis

• Source of earnings analysis of the projected and actual earnings by the major sources of profit (also called gain and loss analysis) for a product line or line of business, including the analysis reserve change and earnings by individual assumption

• Experience analysis of actual experience vs. expected experience or actual to exposure rates on a chosen assumption, such as mortality or lapse, for purposes of assumption refinement

Robust actuarial modeling drives key business functions of profitability analysis and business and capital planning. Asset, liability and capital calculations for current reporting are the foundation for projected financials, on multiple bases for up to 100 years. Assets and liabilities dynamically interact based on the economic scenario path and chosen reinvestment strategies.

Informed profitability and earnings analysis requires flexibility by product and company practice, and calculation of the following metrics:

• Detailed cashflows such as bond coupons, mortgage and rental payments, dividends, capital repayments, administration fees and expenses
  

• Economic basis (cash flow)

• Earnings (stat, gaap, internal)

• ROE/ROI (Impact on free surplus)

• Embedded value (EEV)
  

• VAR/CTE

• Company specific formulas

Profitability analysis and business planning also require sensitivity analysis and stress testing capabilities (What If? analysis) which demand agility, performance, quality and dynamic asset liability interaction.

Fundamental to the Own Risk and Solvency Assessment (ORSA), or regional equivalent. Applied at the company level or to pricing and planning decisions at product or product line levels. The ability to test deterministic scenarios of single or multiple interacting stress events or trends in economic and experience assumptions.

The AXIS actuarial models allow definition and application of a wide variety of stress scenarios. To a book of business, a portfolio of investments or consistently across the insurance operations in total and reveal the impact on all profit metrics, earnings and capital ratios. Reverse stress testing can be used to estimate the required deterioration in a given assumption to hit a defined impact on any of these measures through an automatic iterative process. Stresses can be combined with management actions including reinsurance, repricing, investment strategies and hedging or sales plan adjustments to provide management with a realistic and comprehensive narrative.