Corporate finance, including Part VII transfers

While with PwC (2001-06) I built an Excel-based corporate model for a new bulk annuity company.  This included the projection of Pillar 1 and Pillar 2 solvency: the main purpose of the model was to project distributable profits to help secure equity capital.

While with Axa (2006-2008) I built another Excel-based corporate model for an annuity company.  This was to be a new insurance company within the group into which annuities could be transferred (or reinsured) from the life company’s with profits funds.  There were two main strands to the work:
• The production of projections to include within the application to the FSA for authorisation of the new company, and
• The calculation of the impact to Axa of transferring/reinsuring the annuities into the new company on a variety of different financial metrics.
I also took charge of the day one logistics of setting up the new firm, bringing together appropriate finance managers to ensure that the relevant funds, assets and liabilities were successfully transferred at time zero.

At Prudential (2008-2010) I developed a dynamic equity hedging program.  I built in appropriate controls, including a new way to present the features of the hedge to senior management.  For more details, follow this link.

At the FSA and PRA (2010-14), I was involved in a number of corporate finance related exercises, including:
• The review of firms’ capital management policies.  Were we as the regulators comfortable with the capital cushions held by our allocated firms?  This was not a trivial question for complicated groups of firms with multiple insurance entities.
• Reviewing the ongoing solvency of an insurer with large amounts of outstanding debt within its parent company.  Thinking through whether restricting dividends could, by increasing the likelihood of debt default, be harmful to the insurer.
• Considering the ongoing solvency of an insurer that was regularly needing capital injections from its parent but expecting to eventually “turn the corner” and start generating enough profits on its existing book to cover its new business strain.  Digging deeper into the firm’s finances we found an interesting driver of profit volatility, which we helped the firm to eliminate.
• A long dialogue with a firm whose with profits fund included a large inadmissible strategic asset.  The firm would soon be in a position where it needed to pay out unfairly low maturity values to maintain its solvency and where maturity values would suddenly jump to very high levels after the asset was sold.  The situation was eventually resolved.

At both the PRA and the FCA (2010-15) I provided actuarial support to the supervisors on a number of Part VII transfers.  Typically I would review the Actuarial Function Holder, With Profits Actuary and Independent Expert reports and challenge the authors on their assumptions, calculations and conclusions.  My three areas of focus were typically:
• The impact on policyholder security (mainly of interest to the PRA).
• The impact on expected policyholder benefits (FCA).
• Any changes to policy options, quality of customer service (FCA), etc.

While with the FCA (2014-2015) I provided actuarial support to the supervisors (and challenge to the firms) over two exercises to transfer annuities out of with profits funds.  For the transfers to be fair to with profits policyholders, I paid particular attention to:
• The price at which the annuities were to be transferred.
• The impact of the transfer on expected with profits maturity values for the first few years after the transfer.
• The benefit to policyholders maturing further into the future of being invested in a fund with a more appropriate risk profile.

From September to December 2018 I helped Grant Thornton with the documentation of Independent Expert and Supplementary Reports for two Brexit-related Part VII transfers.