IFRS 17 Peer Analysis and Insurance Industry Perspective

Transcription

1 IFRS 17 Peer Analysis and Insurance Industry Perspective August 2017 kpmg.com

2 Table of contents Overview Introduction Key findings Peer characteristics Key themes Strategic use Impact assessment Data and modeling Lobbying efforts IFRS 9 Cost and resourcing Roadmap Page 3 Page 7 Appendix A Company information Page 18 Appendix B Country variations Page 29 2

3 Overview

4 Introduction Purpose of report This report was prepared with the following objectives: Provide a qualitative review of twelve global insurers, each on their own IFRS 17 journey Help inform companies as they make decisions about their cost options and roadmap Present industry perspectives across several dimensions of the IFRS 17 implementation The information on companies was gathered via personal interviews with partners from our global member firms, who are familiar with the decisions and considerations of these companies. The companies represent a cross-section of the global insurance industry in order to provide information based on both similar and different business characteristics from company to company. The companies include: Nine companies for whom IFRS is the primary basis of reporting and three companies for which it is not Six multi-line insurers and six life insurers. Seven of the companies have revenues over $50 billion and seven have assets > $500 billion < $500 b > $500 b Assets North American Multi-Line Insurer Asian Life Insurer Global Multi-Line Insurer North American Life Insurer Asian Life Insurer Global Multi-Line Insurer Global Multi-Line Insurer Global Multi-Line Insurer European Headquartered Life Insurer North American Life Insurer Global Life Insurer Global Multi-Line Life Insurer Revenue < $50 b > $50 b 4

5 Key findings One global insurer in our survey is further ahead than the rest of the companies having started work, above and beyond monitoring and lobbying, on their IFRS analysis going back to 2014 Cost estimates are still evolving. This report provides a current state where such estimates are highly dependent on the following factors: If the implementation is being done for strategic reasons (because it is the primary means of communication to investors) rather than for primarily compliance reasons (which still needs a view of tax, dividend capacity and regulators in the impacted countries), the cost is much higher (> US$100 million) If the implementation program is linked with or integral to a broader transformation program, the IFRS 17-specific costs are reduced as the program leverages the broader capabilities If IFRS 17 implementation activities are delayed, cost estimates increase as more external support is expected to be needed to complete the implementation under required timeframes If already in place, centralized modeling and data approaches and common modeling platforms are expected to reduce implementation costs and ongoing operational costs Roadmaps for implementation follow a common pattern and are highly dependent on mandatory filing dates There is some variation in decisions around impact assessments and timing, number of dry-runs (iterative testing and adjustments) and desired parallel runs (runs performed on a real-time basis) ahead of each option date Roughly half of the companies have closely integrated IFRS 17 implementation with IFRS 9 implementation the other half are executing separately but with a coordinated approach between the projects Many European and Asian peers are lobbying regulators significantly. The most sophisticated are suggesting specific technical solutions to particular issues 5

6 Company characteristics Asian Life Insurer (1) Revenue: < $50 billion Assets: < $500 billion Asia Pacific, Australasia IFRS is primary basis Other measures include: EV Global Multi- Line Insurer (2) Global Multi- Line Insurer (3) Global Multi- Line Insurer (4) North American Multi-Line Insurer (5) Global Multi- Line Insurer (6) European Headquartered Life Insurer (7) Global Multi- Line Insurer (8) North American Life Insurer (9) North American Life Insurer (10) Asian Life Insurer (11) Global Life Insurer (12) Revenue: > $50 billion Assets: > $500 billion Revenue: > $50 billion Assets: > $500 billion Revenue: > $50 billion Assets: > $500 billion Revenue: < $50 billion Assets: > $500 billion Revenue: < $50 billion Assets: < $500 billion Revenue: > $50 billion Assets: > $500 billion Revenue: > $50 billion Assets: < $500 billion Revenue: > $50 billion Assets: > $500 billion Revenue: < $50 billion Assets: < $500 billion Revenue: < $50 billion Assets: < $500 billion Revenue: > $50 billion Assets: > $500 billion North America, Europe, Africa, Australasia North and South America, Europe, Australasia North and South America, Europe, Africa, Australasia North America, Europe, Australasia North America, Europe, Australasia Europe, Asia, North America North America, Europe, Asia North America, Asia North America, Asia, Europe Australasia North and South America, Europe, Australasia IFRS is primary basis Other measures include: EV and Solvency II IFRS is primary basis Other measures include: EV and Solvency II IFRS is primary basis Other measures include: EV and Solvency II IFRS is not the primary basis Other measures include: EV and Solvency II IFRS is not the primary basis Other measures include: EV and Solvency II IFRS is primary basis Other measures include: EV and Solvency II IFRS is primary basis Other measures include: EV and Solvency II IFRS is primary basis Other measures include: EV IFRS is primary basis Other measures include: EV IFRS is primary basis Other measures include: EV IFRS is not the primary basis Other measures include: EV and Solvency II in selected countries Please note: we have used identifiers #1 through #12 throughout the report. 6

7 Key themes

8 Key themes: Strategic use Strategic use Compliance Focused 33% Primary basis of reporting US GAAP 25% Strategic Use 67% IFRS 75% Key findings Only three companies are treating their IFRS 17 implementation as primarily a compliance exercise as most companies plan to use IFRS for strategic decision-making Companies who are required to use IFRS as their primary basis of reporting are inclined to use it for strategic purposes while companies who are not required to use IFRS as a primary basis of reporting regard IFRS 17 as a compliance exercise. However, some Japanese companies may be evaluating cost and benefits of reporting on an IFRS basis Australian companies have a financial incentive for early adoption of IFRS 17 related to tax benefits Some companies are using IFRS as an impetus for other initiatives, particularly actuarial modernization and finance transformation, which is increasing their cost estimates Some companies are resisting IFRS 17 and have not planned on how to deal with it pending clarification that it will indeed be mandatory, e.g., some UK companies have been focused on lobbying and have recently started thinking about a back-up plan if IFRS 17 will be mandatory against their objections Almost all companies are concerned about how IFRS would limit their dividend paying capacity Each country s tax code will interact differently with IFRS 17; it is complex and companies are not as focused on this aspect as they are on the dividend question. It could significantly impact their tax bases and payments especially in Asia. However, the taxing authorities have generally not yet decided how to handle the changes, particularly with respect to transition 8

9 Key themes: Impact Assessment ( IA ) Company 1 Business impact Pilot Full Approach Company 2 Various pre-studies Various impact studies Company 3 Pilot Full Approach Company 4 Pilot Company 5 Pilot Company 6 Pilot Full Approach Company 7 Pilot 2015 Full Approach Company 8 Top Down Approach Company 9 Top Down Approach Company 10 Top Down Approach Company 11 Pilot Full Approach Company 12 Pilot Notes: 1. Pilot means limited countries, BUs or products are included in the IA. It could also mean that only selected areas of impact are included across multiple countries, BUs or products 2. Full Approach means that the IA includes most of the following components: Financial Impact, Financial Architecture, Operations, Methodology, Roadmap, Budget/Cost and Education 3. Top Down approach means a more global or comprehensive approach but not as much depth or detail as a full approach Key findings The first major step most companies take is to perform some sort of an impact assessment. Most companies are still in the middle of their IAs at the time of this report Most companies will have their impact assessment completed by year end 2017 It usually takes three to six months to complete a full-blown IA However, some companies have started with pilots covering either certain aspects of these areas or are starting with certain BUs or countries to focus implementation efforts Certain companies using BUs or countries as pilots may extrapolate their results to the broader group and use them to represent their largest BUs others may use the IA to inform their approach and proceed directly to implementation 9

10 Key themes: Data and modeling Modeling Operations (Centralized vs. Decentralized) Current State Future State Decentralized 75% Decentralized 50% Centralized 25% Centralized 50% Modeling Platform (Common vs. Not Common) Current State Future State Not Common Platform 66% Not Common Platform 33% Common Regional Platform 25% Common Global Platform 17% Common Regional Platform 17% Common Global Platform 42% Note: Centralization could be global or regional and varies by company. For more details, please see the appendix Company analysis has both current state view and future state view based on latest information available Key findings Most companies are currently decentralized with modeling being done locally; most plan to leverage SII / EV models. Some companies are either in initial discussions, or have begun to implement a centralized (either regionally or globally) or consistent group-wide modeling and data storage design. Some companies have a centralized modeling approach for smaller countries whereas others are decentralized Some companies have a central data management tool in place Most companies are planning on approaching CSM modeling on a centralized basis or consistent group-wide Some companies have a single modeling platform for life business while others use different software for different reporting bases and/or countries. The most commonly used software packages for business are Prophet, Moses, and Axis For non-life business modeling is mostly centralized but platforms used vary by country 10

11 Key themes: Lobbying approaches Lobbying efforts Global Regulators No Active Lobbying Lobbying Alone Local Regulators CFO Forum Industry Groups Key findings Who is being lobbied? Regulators Local tax authorities IASB European Financial Reporting Advisory Group (EFRAG) European Commission Who is doing the lobbying? Individual companies Local accounting and actuarial associations Actuarial task force and working groups CFO Forum Insurance Europe Hub Group US lobbying and Europe lobbying forums Number of Companies What are companies lobbying about? (Topics have changed over time) Level of aggregation and the three bucket approach - was revised in final version of standard Mutualization - both how does it relate to mutual entities and how it relates to for profit entities writing par business Scope of the Variable Fee Approach (VFA) especially near misses in Belgium and Switzerland and in many Asian countries Definition of coverage units to release the CSM Operation of fair value approach on transition Need for annual cohorts on fully mutualized business Hedging of par business outside VFA and of business under the GMM Reinsurance issued Proportional business - do you need to reflect business not yet written by the cedant Reinsurance held Non applicability to VFA Mismatching on proportional business Use of locked in discount rates to unwind CSM Need for restatement of comparatives Balance sheet presentation - showing assets and liabilities separately 11

12 Key themes: Lobbying approaches (cont.) Lobbying efforts Global Regulators No Active Lobbying Lobbying Alone Local Regulators CFO Forum Industry Groups Number of Companies Key findings (continued) Lobbying currently has three main targets and areas of focus: IASB, through the Transition Resource Group, to see whether implementation guidance may ameliorate some of the Standard s requirements National standard setters, who in certain countries put standards through an endorsement process before local adoption and will influence when the standard is adopted locally and whether it will be adopted without modification Prudential standard setters and tax authorities, to avoid undesirable knock-on or second order effects Companies in the UK feel that IFRS adds no value at significant cost to their business, and have continued to lobby aggressively against the Standard Other companies are investigating whether changes in jurisdictions or spin-offs could potentially reduce the likelihood that they will need to implement widely for their BUs / countries Most other companies have been lobbying on very specific components of the Standard which could have significant impacts to how their business is presented under IFRS (e.g., unit of account) Some reinsurance companies avoid lobbying efforts in order to align with their clients 12

13 Key themes: IFRS 9 IFRS 9/17 Dates alignment Not aligned 36% IFRS 9/17 Program integration Not integrated 40% Aligned 64% Integrated 60% Key findings Most companies are aligning their IFRS 17 efforts-to-date with IFRS 9 Some companies are fully integrating IFRS 9 with IFRS 17 Companies that are already on Fair Value Through Profit and Loss (FVTPL) are not as concerned about volatility Some companies are using more complex options for IFRS 9 13

14 Key themes: Cost and resourcing Global life Insurer (1) IFRS 17 implementation cost comparison Global Multi- Global Multiline Insurer Line Insurer (2) (6) European Life Insurer (7) Global Multiline North American Insurer (8) Life Insurer (9) Asian Life Insurer (11) Internal Extermal Key findings Costs were not available for all the companies in this paper. For those that provided costs, they are subject to change as the companies complete their Impact Assessments Costs less than US$50M Costs between US$50M & US$150M Costs greater than US$150M Usually smaller and less complex companies Larger companies where funding from other initiatives is kept separately Larger and more complex companies with most of these characteristics: Centralized Modeling Common Modeling Platform Integration with finance initiatives, Data, CFG Integration between Finance and Actuarial Functions Leveraging SII and EV models More centralized and integrated process falls in the lower end of the range Larger and more complex companies, which are less centralized and have less integrated processes Companies who plan to use IFRS for strategic decisions Companies using the IFRS program as impetus for other initiatives with those add-on costs also included Companies are also looking at combining the IFRS initiative with cost cutting initiatives Companies are moving towards having a shared service center and using regional hubs, especially for smaller countries with little-to-no scale Some companies are considering using temporary resources or external consultants for implementation of certain tasks, e.g., modeling, validations, testing Thinking around use of internal vs. external resourcing will evolve in the next twelve months 14

15 Key themes: Roadmap Company Pilot Full Approach Company 2 Pre studies Pilot Company 3 Pilot Full Approach Company 4 Pilot No Information Company 5 Pilot No Information Company 6 Pilot Full Approach Company 7 Pilot Full Approach Company 8 Company 9 Company 10 No Information Company 11 Company 12 Pilot Full Approach Pilot Full Approach Cash flow generation All other implementation Legend: Impact Assessment Implementation Dry Runs / Rollout Parallel Runs Business As Usual (BAU) Pilots, Full Approach or Top Down Approach Most implementations are commonly implemented in waves Iterative process typically resulting in adjustments and reruns Producing results in real-time, may or may not be in full production Producing results in full production mode and in real-time 15

16 Key themes: Roadmap (cont.) Key findings Most companies are in the initial stages of the process and are either performing or have just completed an impact assessment Implementing a solution and updating models is expected to commence in 2018 Most companies are expecting or planning to perform dry runs during 2020 so that they can be ready for adoption by Two companies are targeting earlier dates so that they can be in parallel runs or BAU by 2020 Challenge for many companies is to prepare a fully integrated roadmap which fully reflects the depth of work to be performed including the key dependencies on other initiatives. This can be achieved in two steps: 1. Start with a high-level view of key variables in order to create a target architecture 2. Develop the roadmap and keep the roadmap live Questions to consider 1. Strategic objectives driving implementation? (e.g. treat as compliance and make the easiest-to-implement choices while ensuring we maximize dividend-paying ability of all countries and minimize tax burden) 2. Cost how much do we want to spend on and over what time period? Can this project be used as part of ongoing cost efficiencies? How to split time and cost between internal and external resources? Timing of Implementation? Trade off between project costs and operational costs? How quickly do we want to start the project and at what speed? How quickly or slowly to BAU? Dry runs how many and how extensively? Parallel runs should time be built in for real-time runs? 3. TOM what is our targeted end-state people, process, data, technology and education? 4. Technical strategy of maximizing CSM on transition and the big question is which models to use and how should we approach the modified retrospective calculation (how many years back) vs. Fair Value approach? 5. Resource approach: Company availability of company resources, Full-Time vs Part-Time, staff augmentation Type Finance, Actuarial, Programmers, IT, PMO, HR, Others? End-state central vs local, centers of excellence External parties consultants, contractors, offshoring Education approach for IFRS Roadmap and scoping Top down, 100% vs 80/20 rule or less, geographies How to use pilots or phasing for implementation by product type, region, countries, resource availability? Consecutive vs. simultaneous phasing of activities? 7. Stakeholder management what is the strategy around BU leaders, Senior Management, Regional CFOs and Board communications? Limitations and risks in implementations 1. Learning curve is difficult and requires considerable time, should not be under-estimated 2. Quality, granularity, and consistency of underlying data will be an issue 3. Controls have been a challenge where there is extensive use of manual solutions 4. Change management will be necessary throughout the organization 16

17 Example Peer summary Used for strategic decisions Compliance focused Key Themes 1 Global Life Insurer 2 Global Multi- Line Insurer 3 Global Multi- Line Insurer 4 Global Multi- Line Insurer 5 North American Multi- Line Insurer 6 Global Multi- Line Insurer 7 European Life Insurer 8 Global Multi- Line Insurer 9 North American Life Insurer 10 North American Life Insurer 11 - Asian Life Insurer 12 Global Life Insurer Strategic Used for strategic decisions IFRS is group basis of reporting Centralized Modeling Modeling Common Modeling Platform Centralized CSM Modeling Integration with Finance transformation Leverage EV / SII Integration Integration with IFRS9 Integration with Finance Data Warehouse Integration with Actuarial Data Warehouse Resourcing Use of Regional Hubs Use of Global Hubs Impact Assessment Component Inclusion Other Impact Assessment BU / Country Coverage Lobbying Cost (US$ millions) Notes: 1. A blank square indicates the information was not readily available 2. All responses indicate anticipated future state <

18 Appendix A Company information

19 Key themes: Strategic use Company 1, Asian Life Insurer Using IFRS for strategic decisions IFRS is primary basis of reporting. IFRS 17 is being used as the catalyst to align local and group reporting Company plans to use IFRS implementation as a lever for change. In addition, company is evaluating choices under IFRS17 to optimize tax position and dividend capacity Company 2, Global Multi-Line Insurer Using IFRS for strategic decisions. Taking a cost conscious approach to implementation IFRS is primary basis of reporting. Will have consistent basis of IFRS reporting measures. US business will also have to report under US GAAP, PBR and other metrics. Looking at ways to get out of reporting US GAAP as it is a cost burden to report on both IFRS and US GAAP Concerned about dividend capacity Company 3, Global Multi-Line Insurer Not approaching as strategically as others. No Strategy currently defined IFRS is primary basis of reporting Concerned about dividend capacity and volatility; Not using to optimize capital or dividend back to shareholder Company 4, Global Multi-Line Insurer Using IFRS for strategic decisions IFRS is primary basis of reporting Company 5, North American Multi-Line Insurer Currently seeing IFRS as a compliance exercise IFRS not a primary basis of reporting for most of life business. US GAAP is the primary basis of reporting overall May be used as a platform for change and catalyst to seek executive approval for Finance and Actuarial transformation Company 6, Global Multi-Line Insurer Sees IFRS 17 as a compliance exercise IFRS not primary basis of reporting. Uses U.S. GAAP as a primary basis of reporting UK BU using IFRS as an impetus to get additional projects done Countries are looking at IFRS if it would limit their dividend paying capacity in their assessment Company 7, European Headquartered Life Insurer Currently no strategy on how to deal with IFRS 17 for their European businesses IFRS is primary basis of reporting and IFRS 17 changes profile of earnings. They were looking at Brexit as a potential reason to avoid having to be compliant with IFRS and were working with the UK government to try and use US GAAP instead They have a finance modernization project under way and they may look at how IFRS will fit into that Company 8, Global Multi-Line Insurer Using IFRS for strategic decisions. Against IFRS 17 but has a plan for IFRS 17 as a backup. More compliance minded outside of domiciliary country IFRS is the primary basis of reporting. Using IFRS as an impetus to get other initiatives done Company 9, North American Life Insurer Using IFRS for strategic decisions. Treated this change strategically from the beginning. Driver of change is control of models and higher quality IFRS is the primary basis of reporting Company 10, North American Life Insurer Seeing this as a compliance exercise. They are embracing IFRS 17. However, they have a huge problem with the system e.g. Can't change ledger as the ledger has been highly customized IFRS is the primary basis of reporting Company 11, Asian Life Insurer Use IFRS strategically from earnings improvements measure vs. measure of decision-making. EV may be used for decision making after IFRS adoption. Don t see value in IFRS as it doesn t provide much improvement in reporting IFRS is primary basis of reporting. Already use FV accounting There is significant impact on tax due to DAC writeoff. Significant financial incentive for early adoption Company 12, Global Life Insurer IFRS is not the primary basis of reporting so the implementation is largely compliance focused except where significant dividend and/or tax impacts A major portion of the business by volume of profits is not in countries requiring IFRS as the regulatory basis of reporting 19

20 Key themes: Impact Assessment ( IA ) Company 1, Asian Life Insurer Their Pilot IA (6/17) includes group and countries. The IA includes a Gap Analysis, High level plan and Cost Estimate. Only assessed high level operational impact and high level costing The detailed IA (7/17 12/17) Includes Financial impact, Operational impact, Roadmap and Education Company 5, North American Multi-Line Insurer They are close to starting a Pilot IA (8/17 NA) with the main focus on formulating methodology and product classifications across different jurisdictions. Their domiciliary country and Korea may be pilot countries (as a result of Brexit, they will move their UK business into UK GAAP so that buys some time) Company 2, Global Multi-Line Insurer Their Pilot pre-study (2014) includes Roadmap and Technology and goes through 2021 (refreshed every quarter). Closing oriented approach vs transaction oriented approach which has a cost difference. They have done less work on financial impact than others but they have performed the more detailed financial impacts on a localized vs centralized basis The Pilot IA ( ) was expanded to product classifications and to develop a top down budget The detailed IA (2017) includes Financial Assessment/Impact, Methodology and technical decisions, Education, bottom up budget and detailed Roadmap. They are performing an assessment on product specifications, and systems/technology to come up with the target architecture Company 3, Global Multi-Line Insurer The Pilot IA (7/17 8/17) is a quick fast track assessment and is being performed in their domiciliary country and the US to report to the Board of Directors in August. It incudes volatility experienced under IFRS 9 and 17 in the same analysis and is more focused on financial versus operational impacts. Their strategic reason for the pilot is to assess the financial and operational impacts in their more strategic countries Full IA (9/17 6/18) is for full Financial and Operational Roadmap. Aim is to achieve operational design architecture and implementation plan Company 4, Global Multi-Line Insurer Their Pilot (7/17 11/17) includes Financial Impact, Operations, Roadmap, Budget, Methodology and Education for 5 or 6 selected BUs and they will extrapolate results for whole group. Performing light IA for IFRS 17 with more complex options for IFRS 9 Company 6, Global Multi-Line Insurer Their Pilot (8/17 12/17) includes gap analysis and roadmap for operations, including identifying key methodology decisions and understanding cash flows, being done on 5 countries covering the UK, North America and Asia, and includes IFRS 9 in the pilot. They will develop a manual for non-pilot countries. Countries would evaluate if IFRS would limit their dividend paying capacity Detailed IA (1/18 3/18) includes Financial Impact, Operations, Roadmap, Budget, Methodology and Education and is focused on implementation plan Company 7, European Headquartered Life Insurer Pilot IA (2015) was focused on looking at how particular product types behave under IFRS 17, rather than an at an overall basis. They haven t done anything in the US yet, but have focused on certain technical aspects in UK products and Asia. No comprehensive enterprise wide analysis done yet Detailed IA (6/17 12/17) is under way Company 8, Global Multi-Line Insurer IA (9/17 12/17) includes Financial Impact, Operations, Roadmap, Budget, Methodology and Education and is focused on 3 largest territories. They haven t decided on extrapolation. They have only recently released their RFP for IA, late compared to others Company 9, North American Life Insurer Their IA (1/15 12/16) is a top down approach, looking at impact on cash flows at a high level 20

21 Key themes: Impact Assessment ( IA ) (cont.) Company 10, North American Life Insurer Their IA (2015) is a top down approach looking as impact on cash flows at a high level and focused on 11 methodology/technical decisions Company 11, Asian Life Insurer Phase 1 (9/2016) included preliminary financial impact and field testing Phase 2 (7/17 8/17) includes gap analysis, business impact analysis, project plan/roadmap and cost analysis. Plan to get budget this year and focus on implementation next year Phase 3 (8/17 12/17) looks at financial impact and refines estimates. Focus is on getting information needed to announce what IFRS means to them Company 12, Global Life Insurer The IA timing for the pilot is 2/17 9/17. This is a pilot approach where prototype calculations are made for the 3 largest and/or more complex IFRS countries The work includes a gap analysis on data and models as well as financial impacts for the prototype countries 21

22 Key themes: Data and modeling Company 1, Asian Life Insurer Globally centralized model which took 6 years to implement. Data is loaded locally and models are run centrally in a common Prophet modeling platform. They expect the CSM tool which is expected to be centralized They have an actuarial data warehouse (with policy level data) accessible by corporate office (SAP Insurance Analyzer and Aptitude). However, the data is missing elements required for IFRS 17. They plan to centralize data storage pulls cash flows from Prophet and export it to a central calculation engine, e.g. SAP Insurance Analyzer or Aptitude Planning to leverage existing cash flow generation and EV models as a starting point Part of the broader Finance Transformation and spending more time and money to bring Finance and Actuarial together Company 3, Global Multi-Line Insurer Decentralized modeling with different platforms for each country (and within country as well). They would like CSM tool to be centralized Results database at country level can be accessed by group Leverage SII and EV models more EV model Not linked to bigger initiatives but may have to in US Company 4, Global Multi-Line Insurer Decentralized model with modeling done in Prophet and Moses. However, Asia is regionally centralized (small countries). Plan to roll out implementation of its own proprietary tool globally which will be housed locally with IFRS being transitioned to the new tool. They need a CSM tool which is expected to be centralized Not part of broader transformation, also not mature Company 2, Global Multi-Line Insurer Decentralized modeling in different platforms. The finance structure and tools vary from country to country. The models are run locally using cloud based models. While they have a common Moses modeling platform for EV, the other models vary by country. They need the CSM tool which is expected to be centralized and built rather than purchased Data management tool is used to gather data centrally before going to the ledger. They are investing in an actuarial database which will be rolled out using this program. They are using closing oriented approach which can close IFRS numbers to go to market. In between they will use other metrics. 80% of the data inputs are centrally defined Planning to leverage EV and SII models and understand linking of IFRS 17 and SII. From a systems perspectives they would automate SII reporting first then use for IFRS 17 reporting IFRS effort is combined with the Finance initiative and a cost takeout goal of 20% Company 5, North American Multi-Line Insurer Decentralized modeling and models not on common platform. Moving towards centralized modeling and use of common platform for Life and PC business They are evaluating CSM options available and Pro/Cons (centralized vs decentralized) Company 6, Global Multi-Line Insurer Centralized modeling approach implemented globally. They use Moses everywhere except the US, which uses Axis. They are undergoing a model conversion expected to be done in 3-4 years. They need a CSM tool which is expected to be centralized They hope to leverage EVM and SII models. They are leveraging EVM as a starting point Company 7, European Headquartered Life Insurer Decentralized modeling with Moses used in the UK, Prophet in Asia and MG ALFA and other in the US. They need CSM tool which is expected to be centralized They currently have multiple systems and platforms without any data warehousing or anything They haven t articulated whether they will leverage Solvency II or EV models 22

23 Key themes: Data and modeling (cont.) Company 8, Global Multi-Line Insurer Decentralized modeling in general with no common platform (Prophet is used in most cases) with no plans to centralize right now; however, they have centralized some of the processing. They plan to build one process for IFRS. They need the CSM tool which is expected to be centralized Data output is centralized. They are building a data warehouse for Actuarial reporting (build for SII and IFRS). Cash flows are shared into global shared services for as many countries as possible, but there is a stop gap process until these are migrated Plans to leverage EV and SII models IFRS is part of a broader finance transformation Implementation of any centralized model was a lift and shift without improvements Company 9, North American Life Insurer Decentralized modeling in a common platform (with some exceptions). Actuarial reserving models are in the Cloud. Planning to have North American operations to be all IFRS compliant on Axis with the goal to standardize reserves on Axis everywhere (except for VA and segment funds which is on Atlas now and planning to move to Path wise) Plan to standardize all data, model and model technology for reserving. Plan to have global database of assumptions for reserving IFRS is part of broader transformation with the ultimate goal of Centralization using a single central cloud location where reserving models reside within a Global Data Warehouse for reserves; Core Actuarial functions will be performed locally which will include reviewing results, explaining results and tracking down questions as well as experience monitoring; Global Assumption Setting will be performed by a Central team that agrees on assumptions, Automated assumption change will occur with the only intervention being judgment They plan to have everything automated with a Ledger based source of earnings Company 10, North American Life Insurer Decentralized modeling with Axis becoming the main modeling platform in North America and Asia Data is not harmonized with no central pool or data warehouse for output data. However, the UK business is more advanced and is going into a central data warehouse model Not leveraging any other measure or model currently Not part of broader transformation They have a problem with the system e.g. they can't change the Oracle ledger as it has been highly customized, so they ll need a separate IFRS solution Company 11, Asian Life Insurer Centralized modeling on a common Prophet modeling platform. They have a central modeling team who is responsible for build, change and running models They use a central company data warehouse which has been in place for years Plan to leverage EV or other functionality for IFRS No big finance transformation or other initiatives except streamlining processes to improve efficiencies Company 12, Global Life Insurer Moving from Decentralized to Centralized modeling using a common platform Prophet (non US) (7/17-9/18). For US platforms, the timeline is longer 23

24 Key themes: Lobbying approaches Company 1, Asian Life Insurer How are they lobbying? Lobbying alone and in industry groups Who is being lobbied? Lobbying currently done with local regulators, local accounting and actuarial associations, local tax authorities and IASB What topics? Lobbying for tax elements in their region, timing of IFRS, changes to capital regulatory regimes to align with IFRS, and discount rates Other comments: Very insistent on what they want & hitting hard Supportive of change Company 2, Global Multi-Line Insurer How are they lobbying? Lobbying in own name and with industry groups such as the CFO Forum (industry groups), Insurance Europe and Hub Group Who is being lobbied? IASB, EFRAG, European Commission, local actuarial association What topics? Currently focused on reducing burden of Unit of Account and identification of onerous contracts, and to minimize inconsistencies with Solvency II (e.g. discount rate and risk adjustment principles) Other comments: Very insistent on what they want & hitting hard Supportive of change Company 3, Global Multi-Line Insurer How are they lobbying? Lobbying with CFO Forum (industry groups), US lobbying and Europe lobbying forums What topics? Lobbying for allowance for accounting for hedging instruments Company 6, Global Multi-Line Insurer How are they lobbying? Not actively lobbying as IFRS 17 is not their primary basis of reporting Company 7, European Headquartered Life Insurer How are they lobbying? Lobbying alone and as part of industry groups Other comments: Against IFRS metric as it creates an uneven playing field against European countries. Changes profile of earnings as it is a primary reporting metric. UK companies have an issue because it penalizes them, it is volatile while other European countries look better Company 8, Global Multi-Line Insurer How are they lobbying? Lobbying efforts are mostly solo vs. with other industry groups Who is being lobbied? Lobbying with the IASB Other comments: Against IFRS as a reporting basis similar to other UK companies Company 9, North American Life Insurer How are they lobbying? Lobbying with industry groups with Global companies Wat topics? Lobbying for timing, unit of account and discount rates Other comments: Not much support from home-based counterparts Company 10, North American Life Insurer How are they lobbying? Not lobbying much Company 11, Asian Life Insurer How are they lobbying? Lobbying with regulators, actuarial task forces and working groups What topics? Lobbying for discount rate, tax and regulatory required capital Company 12, Global Life Insurer How are they lobbying? Lobbying with various industry groups Who is being lobbied? Lobbying currently with local regulators What topics? Efforts have largely focused on education and advocating for consistency of treatment Other comments: Further consideration could be given to larger IFRS countries subject to significance of impact on the overall results and/or dividending and taxing positions 24

25 Key themes: IFRS 9 Company 1, Asian Life Insurer Dates are aligned between IFRS 9 and 17 IFRS 9 and 17 will be integrated Not expected to be complex or hard to integrate because of capabilities being built Planning to consolidate IFRS 17 program with IFRS 9 and CECL Company 2, Global Multi-Line Insurer Dates are aligned between IFRS 9 and 17 IFRS 9 and 17 initiatives are coordinated and they are approaching them together Concerned about volatility and dividends Performing on-off tests and sample calculations for IFRS 17 and 9 (understanding Net income & volatility) More complex options for IFRS 9 being considered Company 3, Global Multi-Line Insurer Dates are aligned between IFRS 9 and 17 IFRS 9 and 17 initiatives are coordinated and they are concerned about volatility and dividend capacity Primary focus is on banking activities Started IFRS 9 early because the bank needs to be done by Impact assessment for IFRS 9 was done in mid In implementation mode currently for IFRS 9 Company 4, Global Multi-Line Insurer Dates are not aligned between IFRS 9 and 17 IFRS 9 and 17 not planned to be integrated Company 5, North American Multi-Line Insurer Dates are not aligned between IFRS 9 and 17 They would do IFRS 9 and 17 together and integrate them as well as IFRS 9 and CECL Company 6, Global Multi-Line Insurer Dates are aligned between IFRS 9 and 17 IFRS 9 and 17 will be integrated Trying to integrate IFRS 9 and CECL Company 7, European Headquartered Life Insurer Dates are not aligned between IFRS 9 and 17 IFRS 9 and 17 not planned to be integrated Using FV methodology. When they do implement, it will be done with IFRS 9, but IFRS 9 will have a relatively small impact as their investments are already being valued at fair value. Implementation of IFRS 9 won t be significant problem Company 8, Global Multi-Line Insurer Dates are aligned between IFRS 9 and 17 IFRS 9 and 17 not planned to be integrated. Being dealt with separately. Implementation not a major issue Company 10, North American Life Insurer Dates are aligned between IFRS 9 and 17 IFRS 9 and 17 not planned to be integrated Company 11, Asian Life Insurer Dates are aligned between IFRS 9 and 17. They have a banking arm so need to adopt IFRS 9 in 2018 IFRS 9 and 17 not currently integrated Already have FV on assets so integration won t be hard Company 12, Global Life Insurer The company understands the important relationship between IFRS 17 and 9 Incorporated both IFRS 17 and IFRS 9 in the overall IFRS plans and expects that it will be integrated as part of the larger project Not much initial concern raised about volatility but concerned about dividend capacity. Regions still do not have full window into potential volatility on their results, so this concern could heighten 25

26 Key themes: Cost and resourcing Company 1, Asian Life Insurer Total Cost = US$ 120m US$ 140m Includes Internal, external professional services and external IT infrastructure (Internal = 30%, External 70%) Currently have an Actuarial hub in one Asian country and IT service center. May use resources from countries as part of group (spreads out knowledge, handles centralization) Concern generally around resource scarcity. A training program for employees is part of the IFRS17 program Company 2, Global Multi-Line Insurer Total Cost = US$ 175m (IA to Dry runs, Now through Q1 2021) Includes Internal, external professional services and external IT infrastructure (Internal = 60%, External 40%). Only IFRS related activities in IFRS budget Looking to combine with 20% reduction of Finance cost Driving change through central solutions. The change is acting as a catalyst for greater regionalization and use of shared services Assumes IFRS 17 can be introduced without changing feeder systems Company 3, Global Multi-Line Insurer No budget assigned yet. To be evaluated after IA Company 4, Global Multi-Line Insurer No budget approved beyond impact assessment Has a shared service center Company 5, North American Multi-Line Insurer Have some initial budget They are planning to using external support for IA. They don't have bodies to implement IFRS 9 and 17 Company 6, Global Multi-Line Insurer Total = $65m to $130m Includes external professional services plus IT lite solutions Developing Asia hub in Singapore for reporting. Having regional office to have resource to standardize process Company 7, European Headquartered Life Insurer Total = less than $390m Includes internal, external professional services plus IT solutions The idea behind coming up with such a large cost is that there will be a large data component for them along with 70 odd systems which they will have to make IFRS compliant. No significant cost estimates have been made (have assumed similar cost as SII) Have an Asia hub. Improves quality of feed and runs final bits of models for SII in the regional hub Company 8, Global Multi-Line Insurer Total Cost = less than $650m Includes internal, external professional services plus IT solutions Budget is inflated due to additional projects allocated for IFRS (should actually be about $195m for IFRS only activities) Offshore teams in two lower cost countries. Moving to shared service model with standard process Company 9, North American Life Insurer Total Cost = $144m Have been achieving $12m to $16m cost savings annually. View that IFRS program will be largely self funded Company 11, Asian Life Insurer Total Cost = US$ 8m US$ 16m Includes Internal, external professional services and external IT infrastructure (Internal = 50%, External 50%) Extremely low cost is a function two factors: 1. Extensive investment made in centralizing actuarial modeling 2. Current reporting basis is most closely aligned with IFRS 17 Company 12, Global Life Insurer Cash Flow Generation centralization program provides some natural synergies with IFRS needs particularly around data acquisition and reporting. Usefulness will depend on timing and extent of work to be completed for IFRS countries Detailed impact assessment has not yet taken place which would help to define the timing, roadmap and the staffing model for purposes of a budget estimate Some thoughts on regional modeling hubs, which could play an important role in any cost estimate 26

27 Key themes: Roadmap Company details Company 1, Asian Life Insurer Phase 1 (June 2017) Pilot Impact Assessment Includes group and countries: Gap Analysis, High level plan, Cost Estimate, Phase 2 (7/17 12/17) Detailed IA Includes Financial impact, Operational Impact, Roadmap, Education Phase 3 (7/17 6/18) Conceptual Design Plan to mobilize IA to local BUs Product inventory/classification, Policies written Phase 4 (7/18 12/20) Implementation (including dry runs and parallel runs) 2 years of comparatives are planned as a governance exercise Includes dry runs and parallel runs Stage implementation from pilot, wave 1 (largest countries) and wave 2 (smaller countries) Phase 5 (2021) BAU Other Observations Aiming to be ready by 2020 Company 2, Global Multi-Line Insurer Phase 0 (2014) Pre-studies Phase 0 continued ( ) - Planning Expanded to include roadmap, target architecture and top down budget Phase 1 (2017) Implementation Includes central solutions to replicate existing reporting bases, development of target picture and methodology guides Phase 2 (2018) Implementation Actuarial Manual / Accounting Policy Phase 3 (2019) Dry Runs and Parallel Runs P&L testing / Integration testing /dry runs/parallel runs Phase 4 ( ) BAU Company 3, Global Multi-Line Insurer Phase 1 (7/17 8/17) Pilot Impact Assessment Fast track assessment and no financial impact; Assessment in home country and US Phase 2 (9/17 6/18) Full IA for all countries Full Financial and Operational Roadmap Phase 3 (7/18 12/19) Implementation Don't know currently how they will approach implementation and timing is aspirational Phase 4 (2020) Dry Runs Will have a lull in time after the fast track assessment. Won t start implementation until year-end numbers are done. Planning under a couple of scenarios. Focused on US, UK and European home country Phase 5 (2021) BAU Company 4, Global Multi-Line Insurer Phase 1 (7/17 11/17) Pilot Impact Assessment Includes Financial Impact, Operations, Roadmap, Budget, Methodology and Education Company 5, North American Multi-Line Insurer Phase 1 (7/17 N/A) Pilot Impact Assessment Main focus is to formulate methodology and product classification across different jurisdictions Company 6, Global Multi-Line Insurer Phase 1 (8/17 12/17) Pilot Impact Assessment Includes gap analysis, roadmap for operations, Phase 2 (1/18 3/18) Detailed IA/Implementation Plan Includes Financial Impact, Operations, Roadmap, Budget, Methodology and Education Focused on implementation plan Phase 3 (4/18-6/2020) Implementation Phase 4 (7/ /2020) Dry runs Phase 5 (2021) BAU 27

28 Key themes: Roadmap Company details (cont.) Company 7, European Headquartered Life Insurer Phase 1 (2016) Pilot Impact Assessment Focused on looking at how particular product types behave under IFRS 17, rather than on an overall basis Phase 2 (6/17 12/17) Detailed Impact Assessment Phase 3 (1/18 6/2020) Implementation Phase 4 (7/ /2020) Dry runs Phase 5 (2021) BAU Company 8, Global Multi-Line Insurer Phase 1 (9/17 12/17) Impact Assessment Includes Financial Impact, Operations, Roadmap, Budget, Methodology and Education Phase 2 (1/18 7/19) Implementation (Build Solution) Phase 3 (8/19 12/2020) Dry Runs Phase 4 (2021) BAU Company 11, Asian Life Insurer Phase 1 (September 2016) Preliminary Assessment Included financial impact and field testing Phase 2 (7/17 8/17) IA Includes gap analysis, business impact analysis, project plan/roadmap and cost analysis Plan to get budget this year and focus on implementation next year Phase 3 (8/17 12/17) Detailed IA Look and financial impact and refine estimates Focus on getting information needed to announce to market what IFRS means to them Phase 4 (1/18-12/18) Implementation Phase 4 (1/19-6/19) Dry Runs Phase 5 (6/19-12/19) BAU and Parallel Runs Other Observations Significant financial incentive to early adoption A lot has already been done Company 9, North American Life Insurer Phase 1 (1/15 12/16) Impact Assessment Top down approach to IA Phase 2 (1/17 12/18) Implementation (Modeling) Cloud enabled Automated reserves Phase 3 (9/17 7/18) - Implementation (CSM Pilot) CSM for 2 entities Phase 4 (8/18 9/19) - Implementation (CSM Modeling all countries) Rollout CSM to all countries Phase 5 (2020) Dry Runs Full run including G/L Phase 6 (2021) BAU Company 10, North American Life Insurer Phase 1 - IA (2015) Top down approach to IA Phase 2 Implementation (8/17 N/A) In the RFP stage No milestones in RFP; it is focused on operational aspects: Data, Ledger, Modeling, Reporting Company 12, Global Life Insurer Phase 1 (3/17 10/17) Pilot Impact Assessment Includes gap analysis on data and models and financial impact on the 3 largest and/or most complex IFRS countries Phase 2 (11/17 8/18) Full Approach Impact Assessment involving all or the majority of the remaining countries and a deeper dive into other components of an impact assessment Phase 3 (8/17 6/20) Implementation Cash flow generation model centralization from 8/17 to 12/18 All other implementation from 4/18 to 6/20 Phase 4 (3/20 12/20) Dry runs and re-runs based on learnings and adjustments from the previous runs Phase 5 (2021) BAU, which implies in full production mode 28

29 Appendix B Country variations

30 European Considerations EU observations IFRS required for public companies in the EU, but in most countries private companies still use local GAAP The CFO Forum has asked for more time for field testing all of 2018 before EFRAG starts its endorsement deliberations; the Commission is still working towards a 2021 implementation date The Financial Stability Board expects local regulators to support the new standards UK observations Implementation appears likely hard to see how the UK can exit the EU and be a player on the international stage without adopting IFRS IFRS is the norm for all other industries in the UK Delay is possible, though, as lobbying efforts continue to be very active European holding company exception Some are exploring if setting up a holding company in European countries such as Luxembourg could potentially avoid reporting under IFRS However, need to consider comparability to competitors if not reporting under IFRS 30