Principles-Based Reserving

Corporate 129

With VM-21 already live and Principles-Based Reserving (PBR) standards having taken effect on January 1, 2017, the world of valuations and projections has undergone a major transformation. The challenge is that traditional, separate systems for valuation and projection are not equipped to both perform ALM projections and meet VM-20 calculation, assumption and reporting requirements.

Explore the power of a single, modern platform that provides the right combination of governance, flexibility and speed that PBR and VM-20 standards will demand. Out of the box, Prophet’s standard libraries provide companies with everything they need to calculate VM-20 or VM-21.

Single-run, single-click

Even though VM-20 is comprised of multiple parts (a net-premium reserve, deterministic reserve and stochastic reserve), Prophet saves you time and effort by letting you calculate all three parts at once with one button click.

Estimate future reserves

Prophet helps you accurately price products, forecast earnings and understand capital requirements by projecting future VM-20 and VM-21reserves. To accomplish this, Prophet calls a model from within another model, enabling stochastic-on-stochastic modeling and other advanced modeling techniques.

Learn more about our Nested Structures functionality. 

Reduce runtime

When projecting future VM-20 reserves, Prophet reduces runtime by providing you with the ability to call a grouping algorithm “on the fly” within the model. This allows you to use seriatim data in the outer run and NPR calculation, while using grouped data for calculating the deterministic and scenario reserves.

Meet allocation requirements

Prophet performs the allocation of excess reserves, either deterministic or stochastic, back to the individual policy level, as required by VM-20.

Analyze reserves

Unlike traditional statutory reserving, PBR can at times be a stochastic ALM projection – resulting in a greater amount of data and more reliance on business intelligence tools to gain an accurate understanding of how and why reserves are moving through time. Prophet provides database tools to store these results and perform the necessary analysis.

Learn more about the Prophet Results Database and our award-winning Data Management Platform.

Conduct experience analysis

VM-20 assumptions rely heavily on a company’s own experience. Prophet provides an integrated experience analysis tool, called Glean, for creating assumptions as well as an assumptions management tool for viewing, editing and updating those assumptions.

Learn more about our integrated experience analysis tool, Glean, and Prophet Assumptions Manager.

Prophet comes with pre-built variable annuity functionality, for both U.S. GAAP and statutory reporting, including RBC capital requirements. The system also provides the following features and functions:

Customizable benefit riders

Prophet provides all the typical riders as part of our actuarial library, along with the ability to customize standard riders to meet your unique requirements. Our library includes Guaranteed Minimum Withdrawal Benefit riders, Guaranteed Minimum Death Benefit riders, Guaranteed Minimum Income Benefit riders, and Guaranteed Minimum Accumulation Benefit riders, along with the typical rider options such as ratchets and roll-ups.

Learn more about our actuarial libraries.

VM-21 / VACARVM calculations

Prophet helps you accurately price products, forecast earnings and understand capital requirements by calculating VACARVM (a.k.a. VM-21) and future VM-21 reserves using our ALM library and our Nested Structures functionality for future reserves. For projected VM-21 reserves, it also includes the ability to perform a seriatim run while calling an on-the-fly grouping algorithm for the CTE calculation in VM-21.

Learn more about our ALM capabilities.

GAAP balances and projections

With Prophet, you can calculate GAAP balances for Variable Annuity products, including DAC, SOP 03-1 and FAS 133, depending on the product features and riders included on the policy. You can also project future GAAP balances under a variety of management scenarios, including future unlocking impacts using Prophet's Nested Structures functionality.

Learn more about our Nested Structures functionality.

Single-model hedging

Prophet lets you use the same variable annuity model to calculate Greeks, both as-of-today and future Greeks using Nested Structures. Prophet provides a single model for all projection and valuation needs including projected hedging, giving you the ability to eliminate duplicate effort, control hardware and licensing costs, and improve accuracy.

Learn more about Prophet's hedging capabilities.