Investment management for ISG insurance industry

UNIQA has been using ISG Insurance Dimension for asset management since 2004. ISG Insurance Dimension replaced a number of legacy applications and harmonized the IT landscape across Europe, making it possible for all capital assets to be included in the market risk calculations across the company.

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The low-interest challenge 

In 2011, UNIQA launched ‘UNIQA 2.0,’ a long-term growth strategy program designed to concentrate on profitable growth in UNIQA’s core business as a direct insurer. UNIQA 2.0 introduced various new tactics and strategies in order to mitigate the challenges presented by a persistent low-interest environment. This included implementing a sustainable approach for asset liability management, taking into account the particular sensitivities of a structured portfolio containing capital assets compared to the underwriting liabilities. In addition, UNIQA 2.0 looks intensively at UNIQA’s product strategy and profitability control in the framework of a risk-return approach.

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Because of the risk-return trade-off, it is imperative to be aware of the risk tolerance when selecting investments. Taking on some risk is the price of achieving returns; therefore, in order to increase returns, it is impossible to eliminate all risk. The goal instead is to find an appropriate balance and to manage the risk effectively.

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Growing relevance of structured products

In recent years, the markets for structured products and exotic derivatives have experienced tremendous growth in both size and variety. Traditional and new asset classes are used in innovative ways to create instruments tailored for specific investment objectives. While this represents new investment opportunities, it also poses new operational challenges and risks.

Structured financial products are characterized by a combination of several basic financial products, which are different in terms of price sensitivity and risk profile, making them more complex in terms of pricing and management. The diversity and quantity of structured products on the market make it even more difficult to gain an overall overview.

In low-interest periods, excellent risk-return profiles make structured financial products increasingly attractive for institutional investors, despite the narrow regulatory limits set by law for the insurance industry.

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Automated and flexible

After an extensive selection process, including the incumbent vendor, AAM determined that ISG Insurance Dimension was the solution that best fit their needs. As Clack Peters says, “ISG dimensions was able to demonstrate the highest degree of STP (automation) of any solution considered. It was also the only solution capable of meeting our specific investment accounting requirements.”

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Automation up, risk and costs down

Since going into production in 2015, AAM has reaped the benefits of implementing  ISG Insurance Dimension. Clack Peters states, “For many of our investment processes, we have increased the degree of automation (STP) by more than 20%. In terms of investment accounting, we see similar improvements with even more expected once new enhancements are released. For trade processing, we have gone from no automation to more than 85%. These efficiency gains have allowed us to reduce headcounts by 15% as well as substantially lower our operational risk.”

In addition to these benefits, AAM is now able to connect with a much larger number of venues and custodians, granting far greater flexibility with respect to trade processing, settlement and related investment activities.

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Poised to capture growth

Prior to implementing ISG Insurance  Dimension, one of AAM’s challenges was that system limitations curtailed its ability to capture growth opportunities. With these limitations now removed, AAM is able to release and sell new investment products, leverage more venues, expand into new markets and realize its growth ambitions. In this instance, the investment management solution (ISG Insurance  Dimension) acts as a catalyst to growth as opposed to a barrier.

 

The project: Exceeding original expectations

AAM was very pleased with the implementation of ISG Insurance  Dimension. Without the experience of a project of this size and scope, AAM relied on the expertise of ISG Insurance  and EY to ensure that the project ran smoothly. As the project progressed, there was an increase in scope. Despite this, the implementation was successfully completed within the original timeframe and within 2% of the original budget.

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Conclusion

AAM understood that continuously adding manual processes and workarounds (to compensate for inadequate legacy infrastructure) was simply not sustainable going forward. By selecting and implementing ISG Insurance  Dimension, AAM has benefited from much higher rates of automation, flexibility and connectivity. All of these factors have enabled AAM to pursue new growth strategies, reduce their operating costs and mitigate operational risk.

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Quick facts

Name: Aegon Asset Management
Headquarters: The Hague, Netherlands
Industry: Asset Management
 

About Aegon

Aegon Asset Management is a global, active investment manager. We use our investment management expertise to help people achieve a lifetime of financial security, with a focus on excellence, trust and partnership. 

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Investors worldwide entrust Aegon Asset Management to manage approximately EUR 343 billion on their behalf. Positioned for success in our chosen markets (the UK, Continental Europe, North America and Asia), Aegon Asset Management's specialist teams provide high-quality investment solutions across asset classes.

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Through the Aegon Group our heritage stretches back to 1844, meaning we understand the importance of long-term relationships, robust risk management and sustainable outperformance. A long and successful history of partnership with our proprietary insurance accounts has enabled us to establish experienced investment teams, a solid asset base and proven long-term track records.

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