due diligence for a transfer of engagements – presenter: gary morley
TRANSCRIPT
Due Diligence for a Transfer of
Engagements –
Presenter: Gary Morley
What is it?
The process by a buyer investigating a target to find out
EXACTLY what he is buying, its value and risks
What is it not?
A fishing expedition
Steps to protect both parties
Why do it?
No warranties available
Who does it?
Acquirer with help of professional advisors
Actuary
Legal
Finance/accountant
Compliance
Information Technology (IT)
Internal & External Auditors
Areas of enquiry?
Actuary:
Solvency position – transferee & combined firms
Valuation assumptions
Expenses - transferee & combined firms
Products of transferee – associated risks
Policy management systems – integration challenges
Solvency II – impact & associated costs
Legal:
Employment; TUPE
Litigation
Intellectual property/IT
Property ownership
Contracts (outsourcing)
Constitution
Insurance
Other areas
Finance/accountant:
Accuracy of accounts
Assumptions / basis of valuations
Returns to FSA / HMRC
Trading subsidiaries
Assumptions relating to marketing
Tax issues
Compliance:
Systems & Controls – Compliance Plan, ML &
Financial Crime, TCF, MI, Corporate Governance,
Outsourcing, Financial Promotions etc…
Regulatory Status & Relationships..
Business standards
Enforcement action
Persistency / Cancellation
Information Technology (IT):
Stability of IT policyholder systems
Third party IT providers
Internal Auditors:
Appropriateness of the firms internal function/strategy
and risk management framework, and any risks that
may arise from the approach taken
External Auditors:
Financial controls environment
Accounting policies & balance sheet
Solvency position
Planning assumptions within ‘Financial Conditions
Report’ (FCR)
Outsourcing relationships
Unit pricing
Tax
Land & building
Investments
Returns to FSA / HMRC
Valuations
Solvency II
Problems:
Not knowing the unknown
Timescales
Board involvement & sign-off