Algorithmics and SecondFloor announced today that AEGON, an international life insurance, pension and investment company, has chosen Algo Risk, Algorithmics’ high performance market risk and capital management solution, as its provider of replicating portfolio technology. AEGON will use this technology to create replicating portfolios for its assets and liabilities as part of a comprehensive risk management and risk reporting infrastructure.
Mike Dorsel, vice president – Economic Framework Integration at AEGON, said: “We were looking for an industrial strength, enterprise-wide risk platform to implement portfolio replication for AEGON worldwide. We are confident in our choice to work with both Algorithmics and SecondFloor to integrate replicating portfolio technology into our risk management and reporting processes, and we very much look forward to realizing the benefits for AEGON. We hope to extend the uses of this technology well beyond economic capital reporting and risk dashboards.”
AEGON will implement Algo Risk globally and will use Algorithmics’ patented scenario-based portfolio optimization functionality to calculate replicating portfolios that can be used to measure the value of assets and liabilities quickly under various market risk sensitivities. Algo Risk also includes the ability to aggregate non-market risks (such as operational, insurance and credit risk) into a full enterprise-wide economic capital figure as well as a web-based reporting engine that allows users to analyze economic capital across multiple dimensions.
SecondFloor, an IT services company based in The Netherlands, will participate in the project to help AEGON enhance its risk reporting platform. SecondFloor is developing a custom application which will integrate with Algo Risk to provide AEGON with a workflow and control process which ensures an auditable, automated and centralized process. The custom solution will provide user interfaces that facilitate data collection and distribution, generate the universe of replicating instruments, manage and monitor the portfolio replication jobs, and maintain a business hierarchy allowing users to define the level and aggregation used for reporting.
Martin Knook, ceo of SecondFloor, explains: “We are delighted with the opportunity to co-operate with Algorithmics to develop a platform for AEGON. This is our third project of this nature with Algorithmics – we jointly won an IT innovation award with a similar solution and we know we have an exciting project ahead of us. Our teams are fully committed to delivering a comprehensive solution within an ambitious timeline.”
Curt Burmeister, vice president of Risk Solutions, Algorithmics, said: “Portfolio replication is quickly becoming a standard and accepted methodology for integrating assets and liabilities into a single consistent framework for risk management. We are pleased that AEGON has joined the list of leading insurance companies that have selected Algo Risk as the platform for computing replicating portfolios”
Dr. Andrew Aziz, executive vice president of Risk Solutions, Algorithmics, added: “We are proud that AEGON has chosen to work with Algorithmics and use our technology and methodology to achieve its industry leading vision for capital and risk management. We both share the view that portfolio replication offers an effective and efficient tool for calculating economic capital, for reporting and for real-time risk management.”
