New thinking: Phoenix Group gains new insights and reduces costs

SAS® for data quality and analytics is helping the UK group behind well-known life assurance brands to analyse change and improve profitability, bringing together complex data sources and driving more informed decision making

Phoenix Group (previously Pearl Group) was created in 2005 to improve returns for policyholders of ‘closed’ funds – life assurance funds now closed to new business. Managing over £65 billion in funds for 6.5 million policyholders, and with companies including London Life, NPI, Phoenix, Scottish Mutual International and Swiss Life, Phoenix is dedicated to “new thinking” - an approach that includes using SAS® to integrate data from multiple sources, resulting from the company’s evolution through acquisition, and then to analyse and report on essential data. This means the business benefits from an accurate and consistent view of policies, transactions and liabilities, with the ultimate aim of reducing levels of capital Phoenix must hold.

“SAS has helped us to improve accuracy and quality, giving us greater confidence in our numbers and processes,” says Dave Falconer, Head of Actuarial Data. With the profitability of a life company partly dependent on its ability to release capital, rather than generating profit per se, he adds: “Our goal is that SAS will help Phoenix reduce the capital we hold against operational risk, which includes a certain amount for data risk”

A complex environment

In 2008 Phoenix acquired the closed-book insurance funds operated by Resolution plc. “You also buy a plethora of administration systems, with multiple processes feeding into how data is used to describe the company’s financial position,” says Falconer. “We needed to rationalise and streamline our approaches – to reduce costs and reduce risks.” This work, using SAS, started at Resolution. Since the acquisition, Phoenix has integrated further businesses, with SAS bringing together the multiple systems and approaches, providing a highly efficient standardised approach to data integration and improving data quality. The data covers all existing policies, transactions, valuations and liabilities. When combined, the other Phoenix group companies, multiple legacy sources and outsourced systems mean over 50 administration systems with 300-plus feeds into SAS: policy data, funds data, customer information and more, in various formats.

A strong partnership

Consulting and systems integration company Business & Decision, an experienced SAS partner, played a key role. “They brought the SAS knowledge.” Falconer says. “They understood the issues we faced and, crucially, had valuable experience gained implementing SAS in similar ways at other big insurers. They advised us on working iteratively so we could see value as each component went in.”

Some elements of the solution were built in the IT area, taking in accounting data like transactions, premiums and claims; Falconer says “one source of the truth” feeds through SAS into specially designed data stores and the general ledger. The other elements, developed on the business side, cover actuarial activities; multiple overlaid “layers” built in SAS handle the various processes required to process and explore the data, enabling comparisons over time. Business & Decision helped clarify project direction, ensuring IT development continued while work for the actuarial team received the focus necessary. “This involved dealing with the ‘known’ financial data and sources controlled by IT while bringing more unstructured ‘less known’ data and sources directly into the actuarial team,” says Paul Robertson, Client Services Director, Business & Decision. “We supported that transition to get the solution up-and-running, which included the SAS installation and configuration. Phoenix wanted to move very quickly. By doing this work in such a robust and repeatable manner, I believe we saved Phoenix money on implementation.”

Analysis of change

Robertson continues, “This is about recognising you have lots of data moving around to create financial reports and actuarial valuations, and you need an independent approach that analyses changes using data from all your multiple sources and policy valuations, joining them up using a policy ID, and can validate and audit your data movements. It’s about giving people confidence in the numbers they publish and confidence in the underlying data processing. We’ve layered the process so you can ‘peel back’ to see where issues or problems have developed. It’s very effective ‘rear-view mirror’ analysis.” Up to 30GB of data comes in monthly.

The main beneficiaries of the solution, Falconer says, are actuaries who want to examine how the business is performing and comment on why results have moved in a particular direction. “We have a certain amount of reserves at the start of a year based on policies and what we may need to pay out. By year-end you’re holding a new set of reserves, you’ll have paid money out and will pay more – you need to check what you expected to pay versus what you actually paid. So we look at those types of changes and understand them at a very granular level, rather than only having a high level view where you can see an unexplained loss or profit but can’t drill down further to learn more. So first, we looked at the data used to generate reserves, and have since built up views of how policies have changed.” The data goes through a standardisation process to enable effective comparisons between data from different sources. “SAS® Enterprise Guide® supports all this work,” Falconer adds. “SAS gives us confidence that the data actuaries use is complete and accurate. We can also check if accounting data ties-in with actuarial data - relating to a payment for a claim, say.”

Reducing risk - improving profitability

A key benefit of SAS is that it gives Phoenix the all-important ability to integrate the multitude of data sources necessary to run the business effectively. And given Phoenix’s strategy of growth by acquisition, SAS provides the flexibility to incorporate diverse sources and formats and utilise a timesaving standardised approach as new funds come on board.

Falconer says, “SAS has enabled us to save costs by reducing the headcount to manage our data flows - to pull all the data together, manipulate and clean it - by fifty percent. We have a more efficient, automated and standardised approach. In terms of data quality we’ve seen big improvements, with far more robust processes that are also standardised and are easier to follow, rather than having a Swiss Life-specific process, a Britannic-specific one, and so on.” He says actuaries have seen a “real step-change” in the information available, enhancing their ability to question and better understand the business. Falconer adds, “We’re also looking to use SAS to reduce our capital, which will be a tangible benefit. More robust and so less risky processes mean we should be able to hold less capital” – the end result being improving profitability.

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