Towers Perrin Improves Investment Decision Making
The Problem
Towers Perrin is one of the largest employers of actuaries in the world, providing benefits-related information and consulting services to 10,000 national and international clients — including 379 of the world's largest companies and 799 Fortune 1,000 companies. Pension plans are a primary emphasis for the company. Evaluating pension plans and insurance companies is complicated because of the long time horizons, the number of parties with diverse interests who are affected, and extensive government regulations. To solve its pension planning problems systematically, Towers Perrin required analytics expertise in optimization, stochastic programming, and model construction.
The Analytics Solution
Working with an analytics professional from Princeton University, Towers Perrin employed a stochastic asset-and-liability management system for helping its pension plan and insurance clients understand the risks and opportunities related to capital market investments and other major decisions.
The Value
The asset-and-liability system linked asset risks to liabilities, allowing Towers Perrin client companies to best achieve their goals. For example, US WEST saved $450 million to $1 billion in opportunity costs related to its pension plan by following the advice of the system. Said US WEST Investment Vice President J. Stanford Willie, "Because of the flexibility and reliability of the Towers Perrin system, US WEST Investment Management Company has significantly improved its decision-making ability relative to total fund management. We have been able to conduct more thorough, sophisticated, and useful analysis, which has led to more thoughtful decisions. The system has also given our senior management a better understanding of, and more confidence in, the nature of our investment strategies."
