Clearwater SCF Arizona Case Study
CUSTOMER SUCCESS
SCF Arizona Overcoming More Than Just Everyday Investment Accounting Challenges All businesses in Arizona are required to provide workers’ compensation insurance in case of accident or injury on the job. As the premier provider of workers’ compensation insurance for Arizona businesses and organizations, SCF Arizona has nearly 25,000 workers’ compensation policyholders, representing more than 30 percent of the market in Arizona. SCF is a leading advocate of workplace safety and is proactive in keeping Arizona’s workers’ compensation insurance rates among the lowest in the nation.
SC F Arizona Goes Private As public institutions, state compensation funds are prohibited from writing business outside the states where they were formed and where they operate. Faced with a challenging economic climate and a prevailing “smaller government” philosophy in Arizona, in 2010 SCF took the initial steps to become a private company and shed its public status. On January 1, 2013, the transition became complete. For SCF, the move to become private made sense for a number of key reasons:
it gave the organization the ability to expand its geographic footprint, write policies in other states, and increase its menu of services and products. Broadly speaking, switching to a private company gave SCF much more flexibility to run the organization like a true business, with all the accompanying benefits and challenges. For SCF, there were a number of organizational challenges associated with the switch, particularly for the insurer’s accounting operations and its sizeable and complicated $3 billion-plus investment portfolio. Also complicating things was the organization’s structural complexity: SCF Arizona consists of one parent company and seven subsidiaries.
New Accounting and Investment Challenges The transition challenged SCF from both an accounting and investing perspective. To go from having tax exempt status without federal income tax obligations to being a private company with federal tax obligations is no easy feat. During the transition, the company had to get the tax records in place for portfolio
reporting purposes. This, of course, brought with it a requirement that it provide reporting in an entirely new accounting basis (TAX). “We went from being a nonfederal, tax-paying entity to a federal, tax-paying entity so we had to make big changes to our investment portfolio and to our accounting processes,” says Chief Investment Officer Chad Welborn, an investment professional with over 19 years of experience, seven managing insurance assets. This put considerable strain on SCF’s investment and accounting teams, especially because they already had to consolidate reporting across multiple custodians. At the heart of the problem for SCF was that the foundation of its process was an older, installed investment accounting solution that required extensive manual data entry.
Industry • Private mutual insurance company – workers’ compensation
Asset Size • $3B investment portfolio consisting of approximately 90% fixed-income instruments and 10% equities
Business Issues • Incomplete view of the portfolio • Inefficient accounting processes • Disparate systems for accounting, compliance, performance, and risk reporting and analytics • Keeping up with regulatory changes • Lack of scalability
“We’ve cut 10 to 11 days off of our typical closing time each month. And all the reconciliations are automatically done for us on a daily basis.”
Chad Welborn
Chief Investment Officer
www.clearwateranalytics.com
CUSTOMER SUCCESS
“We went from being a non-federal, tax-paying entity to a federal, tax-paying entity so we had to make big changes to our investment portfolio and to our accounting processes.”
Chad Welborn
Chief Investment Officer
Manual Processes and Disparate Systems “Even before the transition, getting the data for all this was a challenge for us, mostly because a lot of our processes were manual,” says Welborn. “We have a fairly substantial number of securities that we hold in our portfolio. We’ve been relatively active in recent years because of the interest rate changes and the volatility of the market. Manually inputting all of the transactions— the mortgage paydowns that we get, the changing coupons, etc.— and making sure that the information is accurate has always been an issue for us.” And there were other everyday challenges. Welborn and his team had to use a number of different platforms in order to get the information to all the proper internal and external constituents: the CFO, members of the board, auditors, and more. “Historically, we’ve used three different platforms: one for the accounting; one for the performance; and one for the risk analytics,” says Welborn. “And then we’d have to try and combine all of those into one coherent report or multiple reports. It has always been difficult for us, as well as costly.” “We also have a lot of people asking for information on a daily basis about volatility in the portfolio, including the CFO, members of the board, and more,” says Welborn. “They constantly ask us things like: ‘What will the market being down 200 points do to our portfolio’s equity?’ or ‘What’s our exposure to this credit event?’” These issues, and downstream effects of running those multiple platforms, began to add up over time. “And with regard to compliance, trying to get all the information from all the managers—as well as all the internal portfolios that we manage and tie together—it was always such a struggle,” says Welborn. “And then we had to make sure that it was accurate and that we were reporting it on a timely basis.”
Key Benefits • Complete view of the portfolio—Daily visibility and immediate insight into how the portfolio is affected by current events as well as the confidence that the numbers are correct at the end of each month. • Accelerated close times— Streamlined accounting process allowed SCF to cut 10 to 11 days off of typical month-end close times, and reconciliation is done automatically. • Integrated performance , risk analytics, and compliance monitoring— Separate systems for performance, risk, and accounting replaced by single, unified system that replaced manual compliance tracking. • Outstanding customer service and industry expertise —A dedicated account manager operates as an extension of your team by answering questions, providing support and training and keeping SCF abreast of any changes in the market. • Continuous product enhancements— Automatic integration of new pronouncements and regulatory rules into accounting software. • Scalability—System can easily accommodate insurer’s growth as it finishes its transition to a private mutual insurance company and provides greater flexibility in its pursuit of new investment types.
www.clearwateranalytics.com
CUSTOMER SUCCESS
“Clearwater offers a scalable solution that allows us to explore new asset classes without worrying if it’s going to mess up the accounting at the end of the month.” Chad Welborn
Chief Investment Officer
Previous System and New Vendor Selection SCF was previously running an installed version of an accounting platform that required the accounting team to manually enter investment data. While powerful, it put the onus on SCF to track down and input all the security detail minutiae. Because of the pending requirement to file tax reports, SCF began investigating the vendor’s tax module, but discovered that it would be expensive to add that functionality to the existing manual system. At that point, Welborn and his team decided to investigate alternative investment accounting and reporting options. Through professional connections, Welborn learned about Clearwater Analytics’ integrated, web-based investment accounting and reporting solution. After a preliminary investigation and an online demonstration, a Clearwater team flew to SCF’s headquarters in Phoenix to show Clearwater in person. “We just really felt comfortable with the Clearwater team,” says Welborn. “Initially, we were just going to stay with our previous vendor because we had recently implemented new software on the financial management side and were not looking forward to converting to another system. But, after meeting with Clearwater and seeing how easy the transition would be, we were excited about the benefits of using Clearwater.”
Clearwater Benefits Since onboarding with Clearwater in the summer of 2012, SCF has a gained a number of key benefits, including a complete view of the portfolio and accurate and timely investment data. “In the last year and a half, we’ve done a lot of transactions in the portfolio in anticipation of us becoming a mutual insurance company,” says Welborn. “Clearwater has allowed me to know the next day what’s going on and what’s in the portfolio. I have balances, I know the impact of a market move on my portfolio, my performance in a particular portfolio or the portfolio overall. It’s really enhanced my ability to manage everything more effectively.” With Clearwater, SCF’s investment accounting team has been able to streamline their investment accounting and regulatory reporting processes. “One of the things that we’ve really seen since we’ve been with Clearwater is that our closing times at the
end of the month have been drastically reduced,” says Welborn. “We’ve cut 10 to 11 days off of our typical closing time each month. And all the reconciliations are automatically done for us on a daily basis.” “We get reports on the system a day or two after the end of the month. And the great thing about the reports is that if there have been any accounting changes or if any new regulations have come out—these are all integrated into Clearwater. It allows us to take care of those situations really quickly.” Beyond pure accounting, SCF is enjoying the benefits of having an integrated performance, risk, and compliance solution. “Before, we had multiple systems to track the different processes,” says Welborn. “This included separate performance measurement, risk analytics, and accounting systems. With Clearwater, it’s all integrated in one program. This has allowed us to cut our costs.” It’s also saved Welborn a lot of headaches on the compliance side. “Typically, we would get our compliance report on a monthly basis, usually after the end of the month. On a quarterly basis, I have to report to the board and to the executive team if there have been any compliance breaches. In the Clearwater system, I get an email on a daily basis with anything that’s out of compliance in any of my portfolios and can get that corrected before the end of the month and before it becomes an issue.”
“Clearwater has allowed me to know the next day what’s going on in the portfolio...it’s really enhanced my ability to manage everything more effectively.” Chad Welborn
Chief Investment Officer
www.clearwateranalytics.com
CUSTOMER SUCCESS
With all the volatility in the market, Welborn says that Clearwater gives him an intuitive look at his portfolio from an overall perspective—or one manager at a time—to see how certain changes would have an impact. “I’m able to look within our fixed-income investments to see how a rise of ‘x’ basis points would impact my portfolio. We can also do shock analysis so that we can show the board what happens if interest rates move in certain directions. It’s really worked out well—a lot of benefits have come through with this integrated process.” With Clearwater, SCF also receives world-class customer service, including a dedicated account manager to help them, and access to highly trained subject matter experts. “We don’t have to have IT come and download the newest version of our software—it’s all done in the cloud. And with the changes at SCF this last year and a half, we’ve reached out to our Clearwater customer service rep with accounting questions and if he doesn’t have the answer back to us within that day, it’s there very soon,” says Welborn.
Our Locations HEADQUARTERS 950 Bannock Street Suite 1050 Boise, ID 83702
208-918-3630 NEW YORK 88 Pine Street, 7th Floor New York, NY 10005
From Manual Processes to True Scalability Probably the most compelling benefit SCF has gained from Clearwater is scalability; a necessary component of its transition from a public to private institution. “The transition to a private mutual insurance company allows us to add new lines of business as well as go into other states if we want to,” says Welborn. “As part of that, one of the business goals is to look at M&A activity. When we were looking at systems, we wanted to make sure that if we purchased another company, we would be able to integrate it into our investment accounting software without adding a lot of cost.” And because of this scalability, it’s given SCF the freedom and flexibility to try new investment strategies. “In the past, accounting has sometimes dictated if we can pursue a new asset class or not because we didn’t know how to account for it,” says Welborn. “It would take us too long to get up to speed on the particular accounting challenges. That kept us from pursuing some investment types. Clearwater offers a scalable solution that allows us to explore new asset classes without worrying if it’s going to mess up the accounting at the end of the month.”
E-mail Us SALES [email protected]
GENERAL INQUIRY [email protected]
About Clearwater Analytics Clearwater Analytics ® provides web-based investment accounting and portfolio reporting and analytics for corporate treasuries, insurance companies, and asset managers. Clearwater’s daily-aggregated and reconciled solutions deliver the highest level of portfolio transparency available on the market today for insurance clients such as Group Health Companies, The Main Street America Group, Savings Bank Life Insurance Company of Massachusetts, The Warranty Group, and WellCare. Launched in 2004, with offices in New York, New York; Boise, Idaho; and Edinburgh, U.K., Clearwater Analytics reports on more than $950 billion in assets for thousands of institutional investors. For more information, visit www.clearwateranalytics.com. ©2013 Clearwater Analytics All rights reserved. This case study is for informational purposes only. Clearwater makes no warranties, express or implied, in this summary. All technologies described herein are either registered trademarks or trademarks of their respective owners in the United States and/or other countries.
www.clearwateranalytics.com
SCF Arizona Overcoming More Than Just Everyday Investment Accounting Challenges All businesses in Arizona are required to provide workers’ compensation insurance in case of accident or injury on the job. As the premier provider of workers’ compensation insurance for Arizona businesses and organizations, SCF Arizona has nearly 25,000 workers’ compensation policyholders, representing more than 30 percent of the market in Arizona. SCF is a leading advocate of workplace safety and is proactive in keeping Arizona’s workers’ compensation insurance rates among the lowest in the nation.
SC F Arizona Goes Private As public institutions, state compensation funds are prohibited from writing business outside the states where they were formed and where they operate. Faced with a challenging economic climate and a prevailing “smaller government” philosophy in Arizona, in 2010 SCF took the initial steps to become a private company and shed its public status. On January 1, 2013, the transition became complete. For SCF, the move to become private made sense for a number of key reasons:
it gave the organization the ability to expand its geographic footprint, write policies in other states, and increase its menu of services and products. Broadly speaking, switching to a private company gave SCF much more flexibility to run the organization like a true business, with all the accompanying benefits and challenges. For SCF, there were a number of organizational challenges associated with the switch, particularly for the insurer’s accounting operations and its sizeable and complicated $3 billion-plus investment portfolio. Also complicating things was the organization’s structural complexity: SCF Arizona consists of one parent company and seven subsidiaries.
New Accounting and Investment Challenges The transition challenged SCF from both an accounting and investing perspective. To go from having tax exempt status without federal income tax obligations to being a private company with federal tax obligations is no easy feat. During the transition, the company had to get the tax records in place for portfolio
reporting purposes. This, of course, brought with it a requirement that it provide reporting in an entirely new accounting basis (TAX). “We went from being a nonfederal, tax-paying entity to a federal, tax-paying entity so we had to make big changes to our investment portfolio and to our accounting processes,” says Chief Investment Officer Chad Welborn, an investment professional with over 19 years of experience, seven managing insurance assets. This put considerable strain on SCF’s investment and accounting teams, especially because they already had to consolidate reporting across multiple custodians. At the heart of the problem for SCF was that the foundation of its process was an older, installed investment accounting solution that required extensive manual data entry.
Industry • Private mutual insurance company – workers’ compensation
Asset Size • $3B investment portfolio consisting of approximately 90% fixed-income instruments and 10% equities
Business Issues • Incomplete view of the portfolio • Inefficient accounting processes • Disparate systems for accounting, compliance, performance, and risk reporting and analytics • Keeping up with regulatory changes • Lack of scalability
“We’ve cut 10 to 11 days off of our typical closing time each month. And all the reconciliations are automatically done for us on a daily basis.”
Chad Welborn
Chief Investment Officer
www.clearwateranalytics.com
CUSTOMER SUCCESS
“We went from being a non-federal, tax-paying entity to a federal, tax-paying entity so we had to make big changes to our investment portfolio and to our accounting processes.”
Chad Welborn
Chief Investment Officer
Manual Processes and Disparate Systems “Even before the transition, getting the data for all this was a challenge for us, mostly because a lot of our processes were manual,” says Welborn. “We have a fairly substantial number of securities that we hold in our portfolio. We’ve been relatively active in recent years because of the interest rate changes and the volatility of the market. Manually inputting all of the transactions— the mortgage paydowns that we get, the changing coupons, etc.— and making sure that the information is accurate has always been an issue for us.” And there were other everyday challenges. Welborn and his team had to use a number of different platforms in order to get the information to all the proper internal and external constituents: the CFO, members of the board, auditors, and more. “Historically, we’ve used three different platforms: one for the accounting; one for the performance; and one for the risk analytics,” says Welborn. “And then we’d have to try and combine all of those into one coherent report or multiple reports. It has always been difficult for us, as well as costly.” “We also have a lot of people asking for information on a daily basis about volatility in the portfolio, including the CFO, members of the board, and more,” says Welborn. “They constantly ask us things like: ‘What will the market being down 200 points do to our portfolio’s equity?’ or ‘What’s our exposure to this credit event?’” These issues, and downstream effects of running those multiple platforms, began to add up over time. “And with regard to compliance, trying to get all the information from all the managers—as well as all the internal portfolios that we manage and tie together—it was always such a struggle,” says Welborn. “And then we had to make sure that it was accurate and that we were reporting it on a timely basis.”
Key Benefits • Complete view of the portfolio—Daily visibility and immediate insight into how the portfolio is affected by current events as well as the confidence that the numbers are correct at the end of each month. • Accelerated close times— Streamlined accounting process allowed SCF to cut 10 to 11 days off of typical month-end close times, and reconciliation is done automatically. • Integrated performance , risk analytics, and compliance monitoring— Separate systems for performance, risk, and accounting replaced by single, unified system that replaced manual compliance tracking. • Outstanding customer service and industry expertise —A dedicated account manager operates as an extension of your team by answering questions, providing support and training and keeping SCF abreast of any changes in the market. • Continuous product enhancements— Automatic integration of new pronouncements and regulatory rules into accounting software. • Scalability—System can easily accommodate insurer’s growth as it finishes its transition to a private mutual insurance company and provides greater flexibility in its pursuit of new investment types.
www.clearwateranalytics.com
CUSTOMER SUCCESS
“Clearwater offers a scalable solution that allows us to explore new asset classes without worrying if it’s going to mess up the accounting at the end of the month.” Chad Welborn
Chief Investment Officer
Previous System and New Vendor Selection SCF was previously running an installed version of an accounting platform that required the accounting team to manually enter investment data. While powerful, it put the onus on SCF to track down and input all the security detail minutiae. Because of the pending requirement to file tax reports, SCF began investigating the vendor’s tax module, but discovered that it would be expensive to add that functionality to the existing manual system. At that point, Welborn and his team decided to investigate alternative investment accounting and reporting options. Through professional connections, Welborn learned about Clearwater Analytics’ integrated, web-based investment accounting and reporting solution. After a preliminary investigation and an online demonstration, a Clearwater team flew to SCF’s headquarters in Phoenix to show Clearwater in person. “We just really felt comfortable with the Clearwater team,” says Welborn. “Initially, we were just going to stay with our previous vendor because we had recently implemented new software on the financial management side and were not looking forward to converting to another system. But, after meeting with Clearwater and seeing how easy the transition would be, we were excited about the benefits of using Clearwater.”
Clearwater Benefits Since onboarding with Clearwater in the summer of 2012, SCF has a gained a number of key benefits, including a complete view of the portfolio and accurate and timely investment data. “In the last year and a half, we’ve done a lot of transactions in the portfolio in anticipation of us becoming a mutual insurance company,” says Welborn. “Clearwater has allowed me to know the next day what’s going on and what’s in the portfolio. I have balances, I know the impact of a market move on my portfolio, my performance in a particular portfolio or the portfolio overall. It’s really enhanced my ability to manage everything more effectively.” With Clearwater, SCF’s investment accounting team has been able to streamline their investment accounting and regulatory reporting processes. “One of the things that we’ve really seen since we’ve been with Clearwater is that our closing times at the
end of the month have been drastically reduced,” says Welborn. “We’ve cut 10 to 11 days off of our typical closing time each month. And all the reconciliations are automatically done for us on a daily basis.” “We get reports on the system a day or two after the end of the month. And the great thing about the reports is that if there have been any accounting changes or if any new regulations have come out—these are all integrated into Clearwater. It allows us to take care of those situations really quickly.” Beyond pure accounting, SCF is enjoying the benefits of having an integrated performance, risk, and compliance solution. “Before, we had multiple systems to track the different processes,” says Welborn. “This included separate performance measurement, risk analytics, and accounting systems. With Clearwater, it’s all integrated in one program. This has allowed us to cut our costs.” It’s also saved Welborn a lot of headaches on the compliance side. “Typically, we would get our compliance report on a monthly basis, usually after the end of the month. On a quarterly basis, I have to report to the board and to the executive team if there have been any compliance breaches. In the Clearwater system, I get an email on a daily basis with anything that’s out of compliance in any of my portfolios and can get that corrected before the end of the month and before it becomes an issue.”
“Clearwater has allowed me to know the next day what’s going on in the portfolio...it’s really enhanced my ability to manage everything more effectively.” Chad Welborn
Chief Investment Officer
www.clearwateranalytics.com
CUSTOMER SUCCESS
With all the volatility in the market, Welborn says that Clearwater gives him an intuitive look at his portfolio from an overall perspective—or one manager at a time—to see how certain changes would have an impact. “I’m able to look within our fixed-income investments to see how a rise of ‘x’ basis points would impact my portfolio. We can also do shock analysis so that we can show the board what happens if interest rates move in certain directions. It’s really worked out well—a lot of benefits have come through with this integrated process.” With Clearwater, SCF also receives world-class customer service, including a dedicated account manager to help them, and access to highly trained subject matter experts. “We don’t have to have IT come and download the newest version of our software—it’s all done in the cloud. And with the changes at SCF this last year and a half, we’ve reached out to our Clearwater customer service rep with accounting questions and if he doesn’t have the answer back to us within that day, it’s there very soon,” says Welborn.
Our Locations HEADQUARTERS 950 Bannock Street Suite 1050 Boise, ID 83702
208-918-3630 NEW YORK 88 Pine Street, 7th Floor New York, NY 10005
From Manual Processes to True Scalability Probably the most compelling benefit SCF has gained from Clearwater is scalability; a necessary component of its transition from a public to private institution. “The transition to a private mutual insurance company allows us to add new lines of business as well as go into other states if we want to,” says Welborn. “As part of that, one of the business goals is to look at M&A activity. When we were looking at systems, we wanted to make sure that if we purchased another company, we would be able to integrate it into our investment accounting software without adding a lot of cost.” And because of this scalability, it’s given SCF the freedom and flexibility to try new investment strategies. “In the past, accounting has sometimes dictated if we can pursue a new asset class or not because we didn’t know how to account for it,” says Welborn. “It would take us too long to get up to speed on the particular accounting challenges. That kept us from pursuing some investment types. Clearwater offers a scalable solution that allows us to explore new asset classes without worrying if it’s going to mess up the accounting at the end of the month.”
E-mail Us SALES [email protected]
GENERAL INQUIRY [email protected]
About Clearwater Analytics Clearwater Analytics ® provides web-based investment accounting and portfolio reporting and analytics for corporate treasuries, insurance companies, and asset managers. Clearwater’s daily-aggregated and reconciled solutions deliver the highest level of portfolio transparency available on the market today for insurance clients such as Group Health Companies, The Main Street America Group, Savings Bank Life Insurance Company of Massachusetts, The Warranty Group, and WellCare. Launched in 2004, with offices in New York, New York; Boise, Idaho; and Edinburgh, U.K., Clearwater Analytics reports on more than $950 billion in assets for thousands of institutional investors. For more information, visit www.clearwateranalytics.com. ©2013 Clearwater Analytics All rights reserved. This case study is for informational purposes only. Clearwater makes no warranties, express or implied, in this summary. All technologies described herein are either registered trademarks or trademarks of their respective owners in the United States and/or other countries.
www.clearwateranalytics.com
