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CAL/ FEDSURE INTEGRATION. 23 NOVEMBER 2001. Presentation Outline. Philosophy Martijn Appelo Products and Valuation Martijn Appelo Integration Progress Hennie Nortje System Conversion Hennie Reyneke Accounting and Investments Andrew Birrell. Looking Back.

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Presentation Transcript


23 NOVEMBER 2001


Presentation Outline

  • Philosophy Martijn Appelo
  • Products and Valuation Martijn Appelo
  • Integration Progress Hennie Nortje
  • System Conversion Hennie Reyneke
  • Accounting and Investments Andrew Birrell

Looking Back

An agreement was reached with Fedsure on

24 August The agreement is effective from

31 May 2001


  • CAL has reinsured individual life policies underwritten by Fedsure ILD
  • CAL assumes responsibility for the administration of the policies covered in the reinsurance agreement
  • Investec 29% shareholder in CAL
what we found
What we found
  • New Business Cost : R2 400 - R4 400
  • Renewal Cost : R 460 - R 250
  • Systems : Policy Administration - Fedsure ILD / Norwich
  • Business Processes - Fedsure ILD / Norwich
  • Large number of isolated projects
physical locations
Physical Locations

Cape Town Johannesburg Other

Systems Programmers Programmers

Accounts Management Department

Call Centre Department

Branches Various

Head Office Staff

initial decisions
Initial Decisions
  • Investment administration to IAM
  • Close new business
  • Cost is priority
  • CAL : Process
  • : Systems
  • : Location

Life Assurance Company Activities

  • New business
  • Monthly administration
  • Periodic administration - statutory returns
  • Investment functions
  • Internal administration - staff

- location

life assurance company
Life Assurance Company

Example: Monthly administration:

- Collect premiums

- Allocate premiums

- Accounting

- Investments

- Policy alterations

- Policy benefits

- Policy charges

- Reassurance

- Record keeping

life assurance company9
Life Assurance Company
  • Functionality required
  • Shortfalls
  • Completeness of computerised systems:
    • - Fedsure
    • - Norwich
    • - Capital Alliance Life
functionality shortfall and importance
Functionality Shortfall and Importance

Values : Very High

Commission : Medium

Multiple investment funds : Low

Investment switches : Lower

Escalation methodology : Medium

Reassurance : Low

Loans : High

business decisions
Business Decisions


1. Conversion - Cost

2. Service Levels - Cost

3. Investment returns - Outsourced

4. Policy retention - Result

business decisions12
Business Decisions
  • Systems:
    • Conversion first
    • Solve existing system issues after conversion
  • Perspective:
    • Systems
    • Products
    • Data clean-up
completeness of computerised system
Completeness of Computerised System
  • Fedsure, Norwich, CAL:
    • Policy administration
    • Accounting
    • Investment accounting
    • Matching exercise (policy/ investment)
    • Actuarial interface
    • Analysis of surplus
product process
Product Process
  • Product specifications - outsource SAAC
  • Team: 4 actuaries
        • 4 senior students
        • 2 junior students
        • 3 CAL staff

Product Process

  • Reconciliations
    • - VIP
    • - Prophet
    • - Administration system
  • Data checks - unknown commitments
  • Administration - CAL
  • Completion date - February 2002
  • System conversion is independent
presentation outline
Presentation Outline

Model for success

Integration objectives


Integration team

Achievements to date

Feedback on Service Level Agreements

System conversion

model for success
Model for Success

Mergers frequently fail to meet their objectives

Essential steps to ensuring successful integration:

Sound due diligence

Ensure staff feel secure throughout

Build trust in management

All staff to share a compelling vision

Integrate and streamline systems and processes

cal s integration objectives
CAL’s Integration Objectives

Integrate staff

Integrate systems

Business retention


Optimise intellectual knowledge

Reduce costs

Relocate staff

Seamless transition for policyholders

Achieve complete integration in 15 months


Inherited backlogs

Not achieving Service Level Agreements

Market perceptions

People integration

Manage expectations

Meet timetable deadlines

Pace of integration

the integration team
The Integration Team

Elize O’Neil

Colin Brazer

Enver Dickson

Laurel Towler

Ernest Pereira

Hennie Reyneke

Championed by Martijn Appelo

Lead by Hennie Nortje

Brenda Mills

integration process
To date the integration process

has exceeded expectations

Achievements thus far.……...

Integration Process
physical integration
Physical Integration

CAL business units relocated

Refurbishment of CAL building

Additional staff parking secured

Office environment established

PABX / switchboard equipment upgraded

Fedsure staff relocated to CAL building

it infrastructure
IT Infrastructure

IT capacity planned

Fedsure system access implemented from CAL network

User workstations installed

New servers implemented for email, network, imaging, fax and line of business systems

New storage area network implemented

skills knowledge transfer
Skills & Knowledge Transfer

Authorisation processes revised

Induction courses facilitated

Call centre multiskilling commenced

Buddy system adopted

people integration
People Integration

Announcement of new EXCO structure

Announcement of management structure

Management integration seminar held

Employment offers finalised

Organisation structures finalised

Divisional teambuilding sessions held

Fedsure staff loaded on CAL payroll

Restructuring and redundancies finalised

Culture survey and forums conducted

process integration
Process Integration

Business process review completed

Volume estimate established

Standard times for activities identified

Business process requirements

systems conversion
Systems Conversion

System conversion teams finalised

Responsibilities per team defined

High level systems analysis completed

Annuity system conversion completed

System conversion detailed plan completed

Time table agreed

staff communication
Staff Communication

TAXI campaign - created the opportunity for staff to actively participate in the integration….

….further enhancing a feeling of security and comfort amongst staff


staff communication35
Staff Communication

Whatzup - a weekly newsletter

Taxi Talk - the official integration news piece


Taxi Talk

other communication
Other Communication


Visits and workshops to intermediaries

Blast faxes

Policyholder communication

brief summary achievements to date
Brief Summary - Achievements to date

Surveys & forums


High level plan for





Physical integration

System processes



of new structure

Culture surveys

& forums conducted

IT infrastructure

Taxi communication

vehicle in progress

Implementation of

new servers


Office moves


Integration team

in place

Induction program




Systems conversion



agreement signed

Relocation of

CAL business units

Conversion of

annuity system

Staff restructuring &






Backlogs inherited

Scanning arrears

Restructuring of silos

Relocation of staff

Data statistics

Staff morale

Double deduction of September premiums

Market value adjuster

Volatile markets

Difficulties Encountered

presentation outline43
Presentation Outline



Fedsure ILD systems

CAL systems

Fedsure source  CAL target

General conversion approach


Project plan

Project feedback


Reduce annual IT costs

per Fedsure ILD policy

by 75%


Convert all Fedsure ILD systems to CAL systems before December 2002 - Speed very important

Business must still meet existing service levels

Reduce Fedsure IT maintenance costs by 75%

Systems must be good not perfect -

manual vs automated

Find short cuts to success

Convert data as-is - do not fix data during conversion

fedsure ild systems
Fedsure ILD Systems


Fedsure policy administration


Norwich policy administration


Fedsure annuities administration




Commission administration


General Ledger


Document and letter printing


Marketing and client/broker enquiries

Eastman Kodak

Workflow and images

Data warehouse

Copy of all Saturn/Lazarus/Fans data


Client enquiries (Call centre)


Fedsure ILD Systems

Annual Costs to run Fedsure ILD systems

  • Saturn R7.6M
  • Lazarus R16.9M
  • Fans/Accounting R3.0M
  • Aims R2.7M
  • Workflow R3.6M
  • Datawarehouse/Internet R3.7M
  • Other R7.7M
  • Depreciation R16.7M
  • VIP minimal



CAL ILD Systems

  • Sun - CAL policy administration
  • Hyphen - Annuities

- Payment and Collection

  • Oculus - Images
  • Internet - Enquiries
  • Accountability - General ledger
  • Prophet - Valuation
fedsure source cal target
Fedsure Source  CAL Target
  • Saturn  Sun / Hyphen
  • Lazarus  Sun / Hyphen
  • Fans  Sun / Hyphen
  • Aims  Sun
  • Eastman Kodak  Sun / Oculus
  • Fads  Fads
  • Datawarehouse  Sun
  • Clues  Sun
  • VIP  Prophet
  • Masterpiece  Accountability
  • Internet  Internet

General Conversion Approach

  • 13 Conversion projects
  • Conversion approach
    • High level analysis
    • Project plan
    • Detailed analysis
    • Programming
    • Testing
    • Training
    • Conversion
    • Verification and audit
  • Streamline system processes – will commence

after conversion

risks identified
Risks Identified

Number of CAL technical (IT/Actuarial) resources

Lazarus product, system and business knowledge

Caliber implementation

Lack of system specifications

Dependency on a number of key resources

Increase in manual processes

WIP on Saturn/Lazarus at conversion stage

Namibia conversion

Functionality not on target environment


Project Feedback

  • So far completed
    • High level analysis
    • Conversion project plan for all projects
    • Converted annuities (Fedsure)
    • Created Saturn file structures on Sun system
  • November- milestones
    • Eastman Kodak conversion
    • Train 10 Jhb CC staff members
    • Train 4 Fedsure staff members on Sun system
    • Values investigation
accounting and investments56
Accounting and Investments

Both the

accounting and investment processes

in Fedsure ILD and Norwich

are considered unsatisfactory,

and substantial changes are required

accounting and investments57
Accounting and Investments

Some of the major challenges

  • Fedsure ILD ran +-150 different investment portfolios
  • Fedsure (Jhb) and Norwich (CT) accounting areas were never integrated
  • No integration of accounting processes into the line of business areas (as per CAL)
  • Most accounting processes were manual
accounting and investments58
Accounting and Investments


  • Jhb Life staff processed journals, but never pulled the accounts together.
  • All cashflows in/out of Fedsure went through the “Net Main Life Fund” bank account i.e. were not allocated to specific portfolios at source. Norwich followed a similar process
  • Historical reconciliations that were never cleaned up

(claims, premiums, loans etc)

progress to date accounts
Progress to date - Accounts

So far

  • Relocation of Jhb accounts staff to the CAL building - simplifying the management challenge
  • CAL has control of all the ILD bank accounts, and implemented new authorisation processes
  • All expenses are now approved via the established CAL processes
  • All staff briefed on the CAL philosophy regarding financial controls
progress to date accounts60
Progress to date - Accounts


  • Staff are now held accountable for producing correct reconciliations
  • Reconciliation of investment assets done at CAL
  • Investec to provide “clean” accounts as at 31 October by 31 December 2001. We are assisting with the process
  • We expect to take over the management accounting process from the CT corporate accounting area from January (Nov & Dec management accounts)
progress to date accounts61
Progress to date - Accounts
  • We have teams cleaning up historic reconciliations.

Progress to date :

desired outcome accounts
Desired outcome - Accounts
  • To move accounting processes into the line of business areas - ensure that all accounting entries are correct at source
  • Achieve the CAL standards in terms of data
    • no more than 20 unallocated debit orders at the end of each month (out of a total of 230 000)
    • reconcile the line of business systems to the general ledger every night
    • have a high degree of comfort with the credibility and integrity of accounting data
    • produce management accounts within 3 weeks of month end - keep a close finger on the pulse of the business
reality check
“Reality check”
  • Much work to be done
  • Historical issues: We have a broad knowledge of issues and have a methodical plan in place
  • Full implementation of CAL process only once conversion completed
  • Complexity in finalising the figures for September 2001 interim report
  • Expectation that this could extend to March 2002 results - under considerable pressure to finalise figures to acceptable degree of accuracy
  • Have warrants from Investec regarding our exposure to reconciliation errors and errors in current assets and liabilities
progress investments
Progress - Investments
  • Investment performance critical to policyholder and shareholder returns.
  • Existing Fedsure and Norwich processes were unnecessarily complex
  • Have simplified investment process by creating unitised structures (“building blocks”)
  • Have reduced 150 portfolios down to 14
  • Asset managers can now focus on returns per building block, instead of administration
  • Simplifies the investment accounting and unit pricing process at CAL
  • Product level portfolio: allocation to
          • Equities
          • Bonds
          • Cash
          • International
          • etc.
  • Transactions at a portfolio level

Product 1

Product 2

Equities Block

Bonds Block

Cash Block


Transactions at a building block level

progress investments67
Progress - Investments


  • Keeping close track of Asset Liability Matching issues, especially the annuity portfolio
  • Took on appropriate portfolios
  • No specific asset concentration risks (2.9% of Inhold and 3.5% of Saambou in total)
  • No “strategic” holdings
  • Relatively high weighting in bonds
progress investments68
Progress - Investments


  • Still have some small holdings to tidy up
  • Have unitised the Fedsure property portfolio, no exposure to individual properties. Participate in the unitised structure with Fedsure Group Benefits and Fedsure shareholders
  • Market value of properties determined at 31 May 2001
  • Ultimately the proof of the process will be in the medium to long term investment returns