Prophet for Life Insurance in North America

Here you can find information on the following topics:

What can Prophet be used for?

Prophet provides a fast, friendly and flexible actuarial solution for:

• Asset-Liability modeling
• Cash flow testing
• Embedded and appraisal valuations
• Financial projections
• US GAAP reporting including Purchase GAAP
• Dynamic Financial Analysis
• Stochastic projections
• Product pricing and design
• Experience analysis

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What is the North American Library of Prophet?

A separate Prophet module has been developed to produce the liability driven components for North American reporting and projected income statements and balance sheets. This has been designed in accordance with the US requirements for statutory and GAAP reporting.

Financial reporting requirements remain country specific. The statutory requirements of the United States are unique. It is critical to reflect those requirements in financial projections, cash flow testing, product pricing, and asset liability management. The ability to reflect US statutory accounting requirements is necessary for US domiciled subsidiaries of international insurance companies as well as US-only companies.

Reporting on a US GAAP basis is generally required for US stock life insurance companies. It is also often necessary for international companies who want to raise capital in the US or who have US parents.

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What are the capabilities of the North American Library?

Prophet is supplied with comprehensive libraries of actuarial formulas. System menus guide the user through a design process which selects the formulas required and helps with detailed coding. The libraries contain the majority of the formulas needed, but are easy to edit and extend if additional features are required. The North American Library for Prophet includes comprehensive functionality for all of the common US products including:

• Universal Life
  • Flexible Premium and Fixed Premium
• Variable Life
  • Flexible Premium and Fixed Premium
• Traditional Life
  • Par and Non Par, Term
• Fixed Annuities
  • Single Premium, Flexible Premium, and Payout
• Variable Annuities
  • Single Premium and Flexible Premium
• Equity Indexed Life and Annuities
  • Single Premium and Flexible Premium

Functionality includes:

• All common statutory reserving methodologies including complete "Triple X" functionality
• Complete support for all Actuarial Guidelines
• Comprehensive US GAAP functionality
  • FAS 60, FAS 97, and FAS 120
  • Facilitates seamless "true-up" and "unlocking" through integrated back-casting of historical experience
• Integrated Purchase GAAP analysis and reporting

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How does the North American Library fit in with Prophet?

The North American Library integrates seamlessly with the other libraries available in Prophet to provide the user with a robust international financial management tool. Other libraries available for life insurance companies include the following:

All of these libraries are being continually enhanced to reflect changing circumstances and to incorporate additional country-specific features as they are required, such as additional financial accounting and reporting requirements.

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What are the ALM capabilities of Prophet?

Most ALM models in Prophet make use of the Asset and Global Strategy libraries. Projections may be deterministic, dynamic or stochastic.

The Asset Library can model a wide range of asset types, including:

• Corporate and government bonds
• Mortgages, including MBSs and CMOs
• Equities and real estate
• Interest rate and equity derivatives

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The Global Strategy Library is used to model investment strategy and to perform calculations that need to be made at the company or portfolio level, such as investment returns, tax, AVR, IMR and shareholder dividends. Investment strategies may vary over time, and in changing circumstances, and include:

• Proportions of future investible cash flows invested in specific asset classes
• Periodic portfolio rebalancing, allowing for the value held for each asset class to be a specified percentage of reserves plus target surplus
• Planned purchases, sales and/or turnover of assets
• Optional hierarchical strategies for the investment of future cash flows, allowing for investing all new money in one asset class until a specified event occurs
• Options to retain cash balances or to borrow to meet outflows until thresholds are breached

In a dynamic projection, the calculations of assets and liabilities are rolled forward periodically, typically quarterly or annually, with purchases and sales of assets taking place automatically to reflect the cashflows and investment strategy. Feedback "linkages" update the assumptions to be used in the projection of each loop of the liabilities, allowing for interest-sensitive crediting rates and dividends.

In a stochastic projection, this process is repeated for each simulation and, for maximum performance, may be distributed automatically across multiple networked PCs. Users may use any economic scenario / interest rate generator that can produce comma-delimited output.

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What does Prophet include?

Prophet is a 32-bit Windows^TM based application that includes many features to help you build, run and report on your models. These features include:

Building your financial models

• Intelligent interfaces for manipulating data and entering assumptions
• Three different development environments to suit your style and experience
• Comprehensive, indexed libraries of formulas to minimize the time and resources needed to implement Prophet
• Diagram View - a powerful representation of the formula dependencies and results, letting you track forwards or backwards through each step of the calculations

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• The latest multi-economy stochastic models and tools to generate and analyze multiple scenarios

Running the calculations

• High performance compiled code
• One multi-purpose model, optimized separately for each actuarial project
• A range of options for repeating subsets of the calculations using different data or assumptions
• Progressive accumulation of results, enabling complex multi-layered models
• Parallel processing across networked and multi-processor PCs
• Full audit trails
• An Application Programming Interface ("API"), enabling Prophet calculations to be integrated into other applications or a website (see www.prophetdemo.com for examples of the API in action).

Reporting on the results

• Prophet Results are a quick and easy way to look at the output from a model. The user can choose between the power of being able to view all variables for all time periods, and the control of viewing coherent subsets for selected time periods (for instance, income statement information). The results can be displayed in a wide range of user configurable charts using the integrated charting facility.
• Prophet Queries allow the user to construct focused reports, charts, and comparisons for any aspect of the results.

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• Prophet Reports allow the user to pre-specify printed reports.
• Prophet Excel Reporting provides a sophisticated interface into Microsoft Excel^TM. It includes numerous reporting templates and the flexibility to design custom reports.
• You can store and output values for each individual policy or model point processed. This greatly facilitates model validation.

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What support is provided?

Documentation

Prophet is supplied with comprehensive manuals that cover all aspects of the libraries, the system, and their use. These manuals also cover the amalgamation of the different components into complete corporate models. In addition, a number of tutorials are supplied to introduce the user to the major features of Prophet. This extensive documentation is provided in both bound and electronic books.

Context sensitive Help is available on every Prophet screen.

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The user can append additional documentation for each component of a financial model within the Prophet workspace. For instance, the original product specifications can be embedded in the model along with a record of the year to year changes.

Other Support

The Prophet Team and ARC consultants provide:

• Regular enhancements to the system and libraries
• Extensive professional skilled assistance with implementation of Prophet
• Regular training courses on a range of Prophet related topics
• A telephone, fax, and e-mail Helpdesk
• Regular user meetings

Support Centers Worldwide

Prophet is supported throughout the world through a number of support centers. For a list of the sites which support Prophet please click here.

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Who to contact?

For more information on Prophet in North America, or to arrange a demonstration, please contact:

Joe Peterson
Actuarial Resources Corporation
6720 West 121st Street
Suite 200
Overland Park
Kansas City KS 66209

Tel: (913) 451-0044

Fax: (913) 451-1562

Email: prophet@arcval.com

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Other products:     Prophet - Life     |     Prophet - General / P&C     |     Glean