12.2.2 Management Accounting Models

Oracle Insurance Allocation Manager for Enterprise Profitability models can generally be divided into two types: Management Ledger level profitability (an aggregated multi-dimensional view) and Customer Account Level profitability (a very detailed view). Management Ledger-level profitability solutions have some advantages over Account Level solutions. They are generally easier to construct and maintain, have shorter processing cycles, and results in smaller, more manageable volumes of data than Account Level profitability solutions.

The primary advantages of Account Level profitability solutions over Management Ledger-level solutions are their ability to segment profitability results using both dimensional measures and non-dimensional attributes & measures found at the account level. Such account-level attributes and measures can be exploited to stratify your results; they can also be assembled into “pseudo” dimensions (low cardinality dimensions) that typically would not support hierarchies in a reporting context. Examples of ways in which you might exploit account-level attributes to supplement multidimensional results would include:

• New Business vs. Total Book of Business
• Repricing Profiles
• Runoff Profiles
• Ranges of Risk
• Customer Level Balance Ranges
• Age of Customer Relationship

Another important advantage of Account Level solutions is that they allow you to construct highly granular capital allocation methodologies. This is particularly valuable in developing Risk-Adjusted Profitability Management (RAPM) metrics (you may, however, aggregate your bottom-up equity allocations to the Management Ledger-level).

Institutions often construct models that yield both kinds of profitability results. When both kinds of models are built, they will sometimes reconcile to one another and they will sometimes not reconcile to one another. Whether or not they reconcile is a function of the methodologies you select and your institution's preferences.