Numerix Leading Hedge Integrated ALM and Hedging Platform

• End-to-end risk management & hedging of VAs & FIAs

• Value assets & liabilities in a single framework

• Valuation of principle based reserves & capital for hedging and financial reporting – GAAP, IFRS, Statutory, and Solvency II

• Higher-order Greeks/Future Greeks

• Nested stochastic projection framework

• Industry-leading asset model library, including Hybrids

• Grid and Cloud-computing enabledwww.numerix.com

®

Empowering our insurance clients with one centralized platform, Numerix Leading Hedge can be used to perform everything from capital and reserve valuation—to hedging and financial planning.

Numerix Leading Hedge paves the way for model consistency across the investment and liability sides of your business. The Numerix model library is the foundation of many of the world’s largest trading and risk platforms and can be easily utilized for product design of VAs and FIAs. By combining Numerix derivative valuation and risk analysis capabilities with a flexible insurance liability simulation engine, Leading Hedge can also value and measure the risk of any insurance liability.

Numerix Leading Hedge provides end-to-end risk management of insurance and annuity products—specializing in Variable Annuities (VAs) and Fixed Index Annuities (FIAs).

With Numerix Leading Hedge, a single platform is all you need for:

• Planning and Forecasting

• Insurance Product Pricing

• Trading and Hedging

• Risk and Capital Management

• Financial Reporting

NUMERIX LEADING HEDGE

“Leading Hedge’s new module

enabled Transamerica to reduce

end-to-end run time from 40

hours to 6 hours while improving

modeling precision. In addition,

Leading Hedge is setting the

stage for additional uses for

nested stochastic projections.”

—Hunt Blatz, Vice President and Head of Model Development, Transamerica Capital Management

“The Numerix platform plays

a central role in elevating our

risk management infrastructure

and analytics. We have realized

significant advances in

flexibility, expandability, reduced

run-time and transparency

with the adoption of Numerix

Leading Hedge.”

— Michael DeWeirdt, Senior Vice President, Financial Risk Management at Ohio National

Leading Hedge enables users to:

Hedge, price and value insurance products: by leveraging the powerful CrossAsset platform

Value assets and liabilities on the same platform for greater consistency

Quickly structure any liability product: from the most simple Life product to the most complex Variable Annuity through Leading Hedge revolutionary “scriplet” technology

Support for modeling risk-managed fund overlays, such as target volatility and capital protections

Value liabilities in a controlled production environment: set controls on user access; keep track of all projections, inputs, and all changes to models and projection settings

Model variable annuity living benefit guarantees (VAGLBs): such as GLWB, GMWB, GMAB, GMIB, and GMDB

Model popular indexed annuity crediting structures: such as Point-to-Point, Asian, Cliquet, Digital, Rainbow, including guaranteed living benefit riders

Hedge variable annuities in-house: calculate Greeks including key rates Greeks, higher-order Greeks, and cross Greeks

Create rapid projections of decremented account values across stochastic scenarios: incorporate partial withdrawals, lapses, mortality, dynamic policyholder behavior, rider election rates, and other factors

Generate Variable Annuity policy projections stochastically: using unified hybrid model framework and deterministically using external prescribed scenarios

Run projections on the Cloud: reduce calculation times and need for an internal grid

Calculate Future Greeks and valuations along a given path to analyze hedging strategy or perform financial planning

Produce a liability trading grid: across a variety of market shocks for rebalancing hedge assets and intra-day rebalancing, with supporting trading models

NUMERIX LEADING HEDGE CAPABILITIES

Numerix Scripting Language with Master Script: Scriplets and Macros

Scriptlet technology leads to faster modeling, prototyping, and reduced time-to-market for VAs & FIAs.

Regulatory Reserve and Capital Calculations

GAAP / IFRS Valuation:

• FAS 133 • SOP 03-1• FAS 157 • FAS 97 DAC

Statutory Reserves:

• AG43• AG33/35

Regulatory Capital:

• RBC C-3 Phase II• Total Asset Requirement (TAR)

Solvency II:

• MCEV• SCR

NUMERIX LEADING HEDGE BENEFITS

Consistency Between Assets and Liabilities

• Project assets and liabilities using the same market models, reducing basis, and increasing accuracy of Greeks and hedge effectiveness

• Market-standard models for all major asset classes, including rates, equity, FX, credit, hybrids, inflation, commodity, volatility, and life

• Accurate asset valuations and option budgets lead to more accurate insurance product pricing

Transparency & Flexibility

• Tiered user access and easy-to-follow audit trails assist in model governance and controls

• View and modify any model parameter or payoff function. Export model into Excel to view implementation in full detailed granularity.

• Data agnostic implementation allows for integration with any inforce system

Ease of Use and Quick Results

• Automate daily valuations, trading grid production, and attributions

• Cloud computing reduces calculation times, and support for internal grid hardware can be eliminated—leading to reduced cost

• Easily integrates with other ESGs, enabling enhanced flexibility and effectiveness

Comprehensive and Advanced Analytics

• Attribution Profile exposes primary risk drivers and uncovers potential hedging strategy leaks

• Future Greeks assist in creating asset allocation, hedging strategies and financial planning

• Value assets with market models and conventions consistent with counterparties to more effectively estimate hedge costs and valuations

• Incorporate risk premium for real world scenarios using Numerix real world models

Multiple methods are available for each of the Greeks, giving flexibility to users

Risk Profile

NUMERIX LEADING HEDGE BENEFITS

Unique hybrid model framework: most robust hybrid model in the industry, enabling accurate pricing and Greek calculations for products consisting of multiple underlyings from different asset classes

Scripting language: intuitive and easy to learn syntax provides users ability to price any exotic option or liability. Utilize scriplets to optimize for projection speed, modularize code, and reuse existing functionality.

Real world scenarios for equity, interest rate, and credit models

Scalable high performance computing: distribute calculations to an internal grid or cloud platform, such as Microsoft Azure for large projections

Low-discrepancy (‘quasi’) random number generator: native variance reduction leads to faster convergence and fewer scenarios

Audit trail: all changes and runs leave an audit trail in the database, recording all information needed

Risk Profile: creates Greeks and trading grid as a batch process, while providing flexibility in methodology and assumptions

Attribution Profile: attributes changes in liability value to various factors and exposes largest risk exposures

Assets: project and value assets using Numerix analytics or user-defined payoff scripts, while applying the same models and projection settings as liabilities

Future Greeks: project risk neutral valuations and Greeks at future timesteps in a nested stochastic framework

Batch processing and automation: Greeks and Risk Profiles run as a batch. Valuations, Greeks, Attribution and trading grid can be automated through the command line with minimal user input

User extensions: write custom functions for use in Leading Hedge for further flexibility

NUMERIX LEADING HEDGE FEATURES

Multiple attribution shocks are compiled into a single Attribution Profile.

Attribution Profile

NUMERIX LEADING HEDGE CROSSASSET XL WORKBENCH

The Numerix Leading Hedge CrossAsset XL Workbench is an extremely flexible and powerful actuarial workbench for the design and pricing of insurance products and hedge assets.

It provides a single unified platform for the most basic to exotic designs—including all types of Variable Annuities, Index Annuities and hedge assets. CrossAsset Excel Workbench includes models across all asset classes including credit, equities, rates, foreign exchange, commodities and inflation. We also provide the industry’s most comprehensive hybrid model framework, which incorporates complex stochastic process for capturing correlation in a way that is consistent with market-observed behavior.

MODEL CONSISTENCY ACROSS LIABILITY AND INVESTMENT SIDES OF YOUR BUSINESS

Many companies are faced with the challenges of instilling a capital markets focused framework for both their product design and investment groups. Numerix model library is the foundation of many of the world’s largest trading and risk platforms and this infrastructure can be easily utilized for product design of Vas and FIAs—enabling companies to institute a consistent price framework and enhance the effectiveness of their hedges.

NUMERIX HYBRID MODEL

The key to hedging risk in a way that is consistent with market-observed behavior is bringing together interest rate, equity, volatility, credit and other factors within a unified, efficient model framework. To accomplish this, it is necessary to incorporate stochastic processes across multiple asset classes and factors. This requires a simultaneous calibration process to accurately capture correlation between volatility factors. Numerix has developed a unique hybrid model framework that provides a structure for designing and calibrating such a model.

Numerix hybrid model framework helps hedge risk that is consistent with market-observed behavior, bringing together all risk factors.

CrossAsset Excel Workbench

Grid Plug-ins (HPC, DS)

Add-on Reporting Module

Leading Hedge Platform

VA/FIA MODELING

Our modeling services include designing the right set of cashflow logic to model variable annuities, fixed annuities, equity index annuities and other investment-linked insurance products. We utilize appropriate market model combinations with consistent calibrations and Economic Scenarios to appropriately capture the various aspects of market risk (economic capital, pricing, designing a new rider, producing trading grids, etc.)

HEDGE ANALYSIS

Our hedge analysis experts will examine an institution’s liability portfolio and its corresponding hedging program—and then perform in-depth analysis and back testing. Numerix financial engineers then analyze the overall profitability and overall success rate and examine how the hedges are actually matching (or not matching) the underlying positions, and advise accordingly.

REGULATORY REPORTING

Our team of insurance quantitative experts will help clients to meet evolving regulatory reporting requirements related to Solvency II, GAAP, IFRS, AG 43, and all other mandates relating to the insurance industry.

ESG SERVICES

Our ESG Services involve taking the Numerix Economic Scenario Generator and implementing it—using the right set of factors, the right set of data assumptions and the right set of model assumptions. The ESG validation and best practices are then tailored by our team of actuaries and financial engineers to meet the specific requirements of the customer. Real World Calibration services are also available, to estimate model parameters and risk premia from historical market data in order to generate real world scenarios.

NUMERIX INSURANCE SERVICESNUMERIX LEADING HEDGE CROSSASSET XL WORKBENCH

Copyright © 2015 Numerix LLC. All rights reserved. Numerix, the Numerix logo, and CrossAsset are either registered trademarks, or trademarks, of Numerix LLC in the United States and/or other countries.

NumerixTechnology Innovation

of the YearOverall #1Technology Vendor

#1 in Pricing and Analytics:Cross-AssetCreditForeign ExchangeRates

#1 in Risk Management:Market Credit

Numerix provides a highly experienced global team of financial engineers and actuaries well-versed in the complex regulatory, hedging and modeling issues that today’s insurance practitioners are currently facing.

www.numerix.com

Numerix LLC

Corporate Headquarters

New York 99 Park Avenue 5th FloorNew York, NY 10016Tel: +1 212 302 2220

EMEA

London 41 Eastcheap, 2nd FloorLondon, UK EC3M 1DTTel: +44 20 7648 6100

Paris58 Bis rue de la Chaussée d’Antin75009 Paris, FranceTel: +33 1 53 25 03 35

FrankfurtAn der Welle 460322 Frankfurt am Main GermanyTel: +49 (0) 69 7593 8636

MilanVia Monte di Pieta’ 2120121 Milano, ItalyTel: +39 345 828 5440

StockholmBirger Jarlsgatan 2, 5 Floor114 34 Stockholm, SwedenTel: +46 (0)8 505 65 100

FinlandJaakonkatu 3B, 7th FloorFI-00100 HelsinkiTel: +358 40 5200 518

DubaiDubai Silcon Oasis HeadquartersBuilding Office D110P.O. Box 341122Dubai, UAETel: +971 (0) 4 372 4061

Asia

Tokyo20F 2-1-1 Otemachi, Chiyoda-kuTokyo, Japan 100-0004Tel: +81 3 6202 1320

Singapore8 Eu Tong Sen Street#24-85 The CentralSingapore 059818Tel: +65 6304 7982

Hong KongLevel 16Man Yee Building60-68 Des Voeux Road CentralCentral, Hong KongTel: +852 3796 2720

Mumbai15th Floor, Dev CorporaPokhran Road No.1Eastern Express HighwayThane - 400601MaharashtraIndiaTel: +91 22 6700 4913

SydneyLevel 34, 50 Bridge StreetSydney, NSW 2047Tel: +612 8216 0757

Americas

VancouverTwo Bentall Centre555 Burrard St., Ste. 375Box 222Vancouver, CanadaV7X 1M7Tel: +1 604 566 9655

Chicago30 South Wacker22nd FloorChicago, IL 60606Tel: +1 312 466 5708

San FranciscoOne Embarcadero CenterSuite 500San Francisco, CA 94111Tel: +1 415 773 2837

Sao Paulo - BrasilAvenida BrigadeiroFaria Lima, 37294 AndarSao Paulo04538905, BrasilTel: +5511 3443 7331

Seoul10FL, Kyobo Securities Building26-4, Youido-dongYongdungpo-gu, Seoul150-737, South KoreaTel: +82(2) 6336-6743

Taipei11F., Walsin Xinyi Building1 Songzhi Road, Xinyi DistrictTaipei CityTaiwan, R.O.C. 110Tel: +886 2 8729 2172

BeijingUnit 1430 14F China World Office 1No. 1 Jianguomenwai Ave.Beijing 100004, ChinaTel: +86 10 6535 0156

®