Valuation and Modeling Support

Objective

A Fortune 500 US life and annuity insurer engaged Graeme Group to place a senior valuation actuary in its corporate actuarial function ahead of year-end close. The client needed an actuary who could run production valuation processes from the first quarter-end, lead market risk benefit and payout annuity reserve analysis under LDTI, and lead the financial analysis of individual annuity results on GAAP and statutory bases. It also wanted a senior practitioner who would coach the team and propose improvements to its models and processes.

A Graeme Group principal, an FSA and MAAA with life and annuity valuation, reporting and model validation experience, began the assignment in December 2025.

Scope of Work

The client set the work priorities across four initial areas:

• Statutory reserve production for the individual annuity block, including the CARVM valuation and its supporting inputs, runs and reconciliations.
• Market risk benefit and embedded derivative disclosure processes under LDTI.
• Financial analysis of individual annuity results.
• Process documentation and improvement.

During 2026 the scope extended to a tax reserve basis analysis, product earnings analysis for the life business, and then to the life modeling team for planning-projection validation and baseline testing of the target Prophet model.

How the Engagement Developed

Phase 1: Year-End Close

The contractor shadowed process owners, documented the steps and completed dry runs before year-end close. He then ran the statutory reserving process from source data and model inputs through to controls and reconciliations. During a review of a vendor-hosted GAAP model upgrade, he and a client actuary identified an unintended material change to a host-contract balance. The client used the prior version for year-end reporting. He also took over the market risk benefit disclosure process and helped resolve in-force data issues before the disclosure runs.

Phase 2: Process Improvement, Tax Reserve Basis and Product Earnings

After year-end, the contractor prepared an improvement plan covering valuation tool consolidation, ownership of the vendor-hosted GAAP model, automation, controls and process documentation. He then prepared a memo and presentation on possible federal tax reserve bases for the pension risk transfer block, including accounting, surplus and audit implications, for corporate tax and external advisors. Working with a junior analyst, he also presented a long-term LDTI earnings projection for a linked-benefit life product. By the second quarter, he was responsible for the upstream statutory reserving steps, and the client extended the assignment through year-end 2026.

Phase 3: Planning Projections and Baseline Testing

The contractor later reviewed life business planning projections across the client's base, LDTI and principle-based reserving runs in Prophet. He compared product groups and traced differences to individual policies. The review identified a missing mortality improvement assumption and inconsistencies in crediting, lapse and premium assumptions. Differences between model versions led to an agreed fourth-quarter program of formula comparisons and regression testing. He also tested statutory reserves in the target Prophet model against the client's policy-level baseline calculations and investigated differences. The first planning round was submitted on schedule, and he was named as backup for forecasting and planning work.

Services Provided

Senior Actuarial Support

The client needed an experienced actuary who could take over a statutory process within weeks and coach the team. A Graeme Group principal began work before the client's deadline.

Working Within the Client Team

The contractor works on the client's systems under its valuation and modeling leads. The client approves hours weekly and adjusts assignments as priorities change.

Managing the Assignment

Graeme Group manages the terms and extensions and can source additional Prophet modelers or valuation actuaries when required.

Outcome

• Year-End Process Taken Over: The contractor took responsibility for statutory reserving within weeks and ran it through year-end 2025 and the first two quarter-ends of 2026.
• Model Error Identified Before Reporting: The review found an unintended material change in the vendor's GAAP model upgrade in time for the client to use the prior version at year-end.
• Work Across Three Functions: At the client's request, the assignment expanded from annuity valuation to treasury and tax analysis, then to life modeling.
• Extended Through Year-End 2026: The client extended the assignment before its original end date.
• Prophet Testing and Follow-Up: The work documented differences between baseline reserve calculations and the target model and identified changes needed across planning model versions.