NEW YORK, N.Y., June 9 – Numerix (www.numerix.com), the leading provider of cross-asset analytics for derivatives valuations and risk management, today announced it has been recognized for Technology Innovation of the Year in the 2014 Structured Products Americas Awards. As Variable Annuities (VAs) and Indexed Annuity (IA) products have gained popularity, Insurance companies are increasingly using a range of quantitative financial tools to manage large portfolios of sophisticated structures. Numerix Leading Hedge provides the cross-asset capabilities and advanced risk analysis required for dynamic hedging, market consistent valuation, capital forecasting and enterprise-level risk management.
As noted by Structured Products Editors, key to Numerix’s award win was its extensive work over the past several years with Transamerica Capital Management. As part of a multi-phase, multi-year asset and liability management strategy Transamerica first began to leverage Numerix’s Leading Hedge life and annuity product hedging platform to manage 160,000 guaranteed minimum withdrawal benefits annuities policies. Eventually adding 50,000 more policies and upgrading to a more complex market model with a term structure of volatility, Greeks increased twofold.
“One would think that because the number of policies, Greeks and attributions all increased while the product logic became substantially more complex, that the run-time would similarly increase,” says Hunt Blatz, vice-president and head of model development at Transamerica Capital Management. “However, Transamerica’s run-times for both the Greeks run and the attributions run decreased from three hours to between two and two-and-a-half hours as a result of technical improvements in the Leading Hedge software.”
In future phases of its strategic partnership, Transamerica will introduce stochastic-on-stochastic scenario simulations, product valuation for financial planning and International Financial Reporting Standard deferred acquisition cost calculations. This entails very large data sets and may require the use of new NoSQL database technology and Numerix’s high-performance cloud computing capabilities. Lastly, Transamerica also plans to integrate its portfolio of hedging assets into Leading Hedge, and work together to complete the implementation of stochastic equity volatility and stochastic rates into the company’s market models using the Numerix hybrid model framework.
“As our relationship has progressed, we’ve taken a collaborative approach with Transamerica – building a scalable, modern infrastructure and future proof design that could be used as its foundational VA platform for the next several decades,” said Steven R. O’Hanlon, Chief Executive Officer & President of Numerix. “As Insurance companies continue to face the enormous complexity of its legacy systems, they lack the transparency and in some cases the analytical background needed to solve challenges. Selected for its comprehensive models, analytical and capital markets expertise – Numerix’s ability to manage the extremely complex and computationally demanding nature of insurance products within a unified, cross-asset platform fit nicely into the client’s vision of a best practice risk system.”
Together with Microsoft Azure insurance companies utilizing Leading Hedge can save massive amounts of time and money. “With the flexibility and scalability of Azure, companies can quickly access the compute power they need across a global network of datacenters to support their complex modeling requirements,” said Tony Jacob, Managing Director, Worldwide Insurance at Microsoft Corp. “By offering high-performance computing cores in the cloud, carriers can have access to elastic compute power that can be consumed and managed like a utility. They gain agility while also greatly lowering the IT costs associated with infrastructure. By leveraging this capability to support Leading Hedge, Numerix allows insurance companies to greatly enhance their real-time insight that improves risk management, regulatory compliance and business performance.”
Hunt Blatz concludes: “I believe Numerix Leading Hedge has the fastest run-time while also being the most flexible projection software available, as well as being relatively easy to learn and use.”
Numerix Insurance solutions are enabling Actuaries, risk-management, product development and valuation professionals to quantify, monitor and manage the risks underlying VA and IA products. With Leading Hedge users have the ability to create, analyze and test complex new product designs and models, and employ sophisticated hedge asset management and dynamic hedging programs. Numerix Economic Scenario Generator (ESG) can also be leveraged as a sophisticated stochastic simulation framework to more accurately capture risk neutral behavior and real-world scenarios.
Numerix is the award winning, leading independent analytics institution providing cross-asset solutions for structuring, pre-trade price discovery, trade capture, valuation and portfolio management of derivatives and structured products. Since its inception in 1996, over 700 clients and 80 partners across more than 25 countries have come to rely on Numerix analytics for speed and accuracy in valuing and managing the most sophisticated financial instruments. With offices in New York, Sao Paulo, London, Paris, Frankfurt, Milan, Stockholm, Tokyo, Hong Kong, Singapore, Dubai, South Korea, India and Australia, Numerix brings together unparalleled expertise across all asset classes and engineering disciplines. For more information please visit www.numerix.com.