SWOT Analysis - NYLB - Research Paper Example

?SWOT Analysis - NYLB Contents SWOT Analysis - NYLB Contents 2 2 The History, Development, and Growth of the Company 3 Literature review 4 InternalStrength and Weakness 5 External Environment 6 SWOT Analyses 7 Corporate level strategy 8 Business level strategy 9 Structure and Control system 10 Recommendations 11 The History, Development, and Growth of the Company The New York Liquidation Bureau known as the NYLB is a unique entity which does not receives any fund from the taxpayers but carriers out the functions of Superintendent of financial services as a receiver and discharges his statutory duties in order to take care of the interest of the creditors and policyholders of those insurance companies which have been declared insolvent and impaired. This function started since 1909 after the New York legislation passed a law which stated that the receiver would have separate responsibility and was appointed by the State Supreme Court of New York (New York Liquidation Bureau, “Home”). Mr.Bing, chief executive officer of the NYLB authored 85 bills that passed the Assembly and around 35 of the bills passed the senate and were signed into law. Among these law included the 2006 law passed by Mr.Bling which stated about the limitation of workers, recovery and clean up workers, compensation claims made by the 9/11 rescues; other law stated were the 2010 no fault divorce law, adoption of the UPMIFA statute in 2010, the law of criminal and civil penalties in the year 2008. Apart from the law stated above the chief executive also authored laws for the insurance and real estate sector so that these industries could taste success even during hard economic times. NYLB performs administrative and operational support to NYLB through economical and timely procurement of goods and services. The claims division looks after the disposition of claims which meets the criteria under the New York Security Fund, enabling NYLB to close its proceeding of estates with the allocated time. The creditor and ancillary division looks after the insolvent users and helps the Superintendent performs his responsibilities. The assets of NYLB are looked after by the finance division and the Human Resource department protects the estates by minimizing the risk (New York Liquidation Bureau-a, “About us”). The bureau does not own any assets, rather it holds and manages the assets of the security funds and estates and acts as a fiduciary for the benefits of the creditors and policyholders of the Estates. The Bureau’s total receipts for the year 2010 stood at $ 195,486,151 as compared to 2009 of $ 100,186,041 and net receipts was much higher as compared to previous year and was calculated to be $15,588,520. Cash comprised only the money which are deposited in the CDA and for longer term investment opportunities the cash is placed in the Money Market Deposit Account so that a more attractive yield is achieved. The bureau monitors the cash balance based which are in excess of insured limits and based on the information, such balances does not represents material credit risk for the New York Liquidation Bureau. Thus cash at the beginning of the year 2010 accounted to $15,022,557 and for 2009 cash was $7407191 and cash at the end of the year accounted for a total amount of $30, 611,077 in 2010 and $ 15,022,557 at the year 2009 (NYLB-c, p.3-4). Literature review The New York Liquidation Bureau performs the responsibility as a Receiver for the Superintendent of Insurance and the Bureau acts on the behalf of the superintendent in order to carry out the duties to safeguard the interest of the creditors and policyholders of the insolvent and impaired insurance companies. The Bureau takes care of the insolvent insurance companies in order to maximize the assets and resolve the liabilities, return back the rehabilitated insurance companies to market place so as to distribute the proceeds of the company to the creditors within the given period of time. NYLB has been performing the function of the Receiver since 1909. When the insurance company is in the stage of receivership the Receiver is being appointed by the Supreme Court of New York. The court approves the function of the superintendent and by the NYLB (RSM McGladrey, p.5). The Bureau is responsible for reducing the time usually required to settle claims and to close the estates. The bureau has reorganized the process which enables the bureau to become economically efficient and fulfill the fiduciary responsibility toward the creditors and claimants. NYLB serves both as a liquidator and receiver and also as the Security Funds claims processor. The Bureau achieves its goal by maximizing the assets and by resolving liabilities. Presently the Bureau looks after 60 estates which consist of 3 domestic rehabilitee companies, 26 domestic liquidated companies, 22 ancillary receivership and about 9 conservations. The Bureaus security funds were established in order to protect the claimants and insured which are affected due to insolvency of the insurance companies which are licensed to operate business in New York. Currently NYLB has about 350 employees (RSM McGladrey, p.6). The Bureau hired the top twenty accounting firms in order to perform a review on the internal controls and financial audits for the financial year 2006 and 2007. At a present date the NYLB publishes the Financial Statements which describes the financial activities in detail and its financial position. These documents constitute mainly the essentials of NYLB’s road towards financial transparency (NYLB-d, p.2). Internal Strength and Weakness The New York Liquidation Bureau which is a unique entity acts under the authority of the superintendent of insurance. The Bureau looks after the impaired and insolvent insurance companies in liquidation and rehabilitation proceedings which are pursuant to Article 74 of the sates insurance laws. This article also insures an equal treatment for its creditors. Thus the company is able to follow the principles of insolvency and this can be regarded as strength of the New York liquidation Bureau (Keenan, p.1). The bureau has completed a plan that would eventually lead to a reduction of about 16% for those consumers who are linked with the Executive Life Insurance Company of New York. The bureau deals in two types of business which includes insurances and estates. The NYLB manages the functions of estates which include domestic estates, ancillary estates. The above functions performed by NYLB can be regarded as its strengths (NYLB-c, p.4). The Bureau information system provides technical information that supports and services to clients, the Bureau’s employees and also maintains the NYLBs telecommunication and computers equipment (New York Liquidation Bureau-a, “Information Technology Systems”). The Bureau’s human resources division excels in minimizing the risk to the estates. Its function includes employee benefits, labor relation, training and development, employment and administration and recordkeeping (New York Liquidation Bureau-a, “Human Resources”). The New York Liquidation Bureau however does not have a defined status and mandate. The Bureau also states that it had performed functions under the law which mandated separate responsibility of the Receiver. But the law did not establish such bureau which would carry out the function. Since the Bureau does not receive funds from the taxpayers hence the resources might get saturated and this might prove to be weakness of the Bureau. The auditors have found about 84 deficiencies in the financial reporting procedure of Ney York Liquidation Bureau. Major weakness of NYLB was that the ledger balances which was calculated using the computers, did not reconcile with the balances of estates particularly those that was predated 1994. External Environment External environment deals with environmental opportunities and threats. The Bureau deals in with the domestic rehabilitations and liquidations as well as for non domestic liquidation. This could be seen as an opportunity for the bureau to expand itself into other states. By domestic it means those insurance companies which were domiciled in New York and the New York Liquidation Bureau was appointed as its liquidator. And non domestic means insurance companies not domiciled in the state of New York. Since the Bureau acts as a liquidator for insurance companies belonging to other states, the company has wider options to expand itself in other states also. The bureau has filled a liquidation plan for executive life insurance company of New York. With the existence of guaranty association, it provides a check and balances the insurance insolvency system. The receivers benefits from the expertise of the Bureau and provides an opportunity for the industry to understand the potential requirements of fund and unique issues that are faced by the insolvent estates. But the industry has a limited involvement in the review of claims of an estate and with a little input to estate specific issue. The auditors have found out that there involved too many people who have access to the digital records of the Bureau and its estates. This might pose a threat to the NYLB as the chances of fraud increases with the involvement of too many people. Also the Bureau relayed on outside consultants for its billing of reinsurance and other functions without a proper oversight. SWOT Analyses After analyzing the internal strength and weakness and the external environment, the New York Liquidation Bureau has been identified as a unique identity however the auditor have found out many shortcomings in the procedure for managing insolvent insurers. The Bureau reported of poor management, lack of transparency and slow pace of work done by the NYLB. The financial reporting of NYLB reported to contain 84 deficiencies out of which 34 has been corrected and the remaining are in the process of getting fixed. The NYLB did not have a CFO to manage the complex financial affairs. To overcome this weakness NYLB hired director of Estate management to manage the operations of NYLB. The Bureau’s Human Resource helps in minimizing the risk of the estates (NYLB-d, p. 3). With the existence of guaranty association, NYLB provides a check and balances the insolvency systems. The Bureau now has an improved set of financial systems and a roadmap for the improvement of the systems and its financial reporting, thus enabling the NYLB to produce a sound financial practice for the future. According to the auditor’s report, an improved and higher quality of financial data have resulted in estate models and better projections which would enable timely distribution and a faster closing of estates. The Bureau has been able to monitor the loss of adjusted expenses such as of vendors and attorney fees where the NYLB was able to recoup around $225,000 approximately in making payments toward law firm. Loss adjustment expenses decreased in the year 2007 and were expected to decrease even more in 2008 as a result of enhanced controls According to the report on internal controls, the Bureau technology systems were inadequate as it was not capable to protect the security of data or frauds. This resulted to a high threat as anybody could misuse the information of the Bureau (NYLB-d, p. 3). Corporate level strategy The New York liquidation bureau has defined its mission statement as a body which acts for the superintendent of financial services appointed by the court as fiduciary and receiver of the insolvent or impaired insurance companies so that the assets are maximized and liabilities are resolved and able to distribute the proceeds in a given time (New York liquidation bureau-b, “The NYLB Mission Statement”). The Bureau acts as a liquidator, conservator, and rehabilitator and as ancillary receiver and carriers out the functions of all the insurance companies. But the bureau is not defined as a state agency as it does not perform any functions which is related to the governmental or proprietary function for the state but it runs the daily operations of the businesses in liquidation with regards to order placed by the supreme court. The bureau maintains its own errors and omission coverage and has its own private counsel. The Bureau deals with both domestic rehabilitation and liquidation and non domestic liquidations. Business level strategy The Bureau deals only with the insolvent insurance companies, thus the Bureau operates in a single line thus its business level strategy is similar to its corporate level strategy. The generic competitive strategy would help to know more about the strategies applied by NYLB. The generic strategies comprise of three approaches and they are cost leadership, differentiation, and focus (Porter, p.35). In cost leadership strategy, a firm tends to create more values than its competitors as it offers products at a lower price than its competitors. Operating as a market leader, where economies of scale allow a firm to enjoy the cost leader strategy. In differentiation strategy, the product offered by the firm is perceived to be unique. The product may be different by way of its design, technology, customer service or other dimensions. In this strategy the competitive advantage is centered on the products and its technology. For the differentiation to take place, a large promotional budget is often needed to create the awareness and a perception of being unique. When company does not go for broad market, focus strategy is the solution. This strategy targets mainly the smaller parts specially the segments or customers groups. The advantage of focus strategy is that it does not involve much cost and it’s easier to design products and services aimed at the smaller markets (Faarup, p. 72). New York liquidation Bureau has adopted the focus strategy as it has targeted the special segment of the market. The NYLB deals with the insolvent insurance companies, helping the sick insurance companies as being a liquidator or rehabilitator. Thus NYLB mainly focus on those insurance companies which are insolvent, thereby applying the focus strategy. The organization being one of its kinds, thus there would not be any competitors as the body looks after the insolvent insurance companies. The NYLB carries out the responsibilities of the superintendent of insurance as receiver. The main motive of NYLB is to maximize the assets and resolve liabilities of the insolvent insurance companies. Structure and Control system The Bureau initially did not have an effective control system but the audit report of 2006 have bought the Bureau into the right track. The achievements represented by the audited financial statement in 2006, have shown NYLB the path of greater financial accountability and transparency. NYLB hired well qualified professionals for the position of Chief Financial Officer. It also hired the directors of Estate Management and Reinsurance in order to manage the NYLB operations. Since the Bureau did not have any comprehensive plan for estates assets, thus it created a plan to analyses and tracks the assets. In the year 2007, NYLB collected about $150 million in reinsurance. In order to pay the distributers within time, the Bureau filed Union indemnity insurance company in 2007 to seek authority so to make prompt distribution to its policy holders. The financial crises of ENLY (Executive Life of New York) estate were taken control with the new administration which seeks to assure the payment of all ELNY’s liabilities for the next seventy years. New York Liquidation Bureau hired a chief information officer to improve the information technology, by upgrading the data infrastructure and communication between the systems (NYLB-d, p. 3-5). Recommendations Analyzing the Bureau strength weakness opportunities and threats, it has been found that the Bureau’s technology and application needs to be revalued to ensure that the systems that is being used meets the needs and requirements of the business and the objectives of funds. Therefore a cost benefit analysis of investments in technology and systems should be performed. The Bureau could visit the guaranty funds of other states so that the Bureau can review their claims systems and their current business practices. Though New York liquidation Bureau has selected a new system to review the claims and the terms of the contract are still to be finalized. The bureau has selected the system based on the comparative benefit analysis. Thus this system would also require an effective internal control and adequate training of the Bureau’s members to get involved in the system. As regards to the TPAs, a comprehensive cost benefit analysis should be performed and the contract along with the resources of the TPA should also be evaluated. The management should consider consolidating the number of TPAs which are based on satisfaction and cost measures. NYLB can move TPA into streamline operations and thus increase the efficiencies, develop a standard contract, create an interfacing system that would be useful in management reports and monitoring the TPAs closely and potentially consolidating the existing TPAs. With the hiring of new management team, NYLB has been able to identify many of the issues and drawbacks which were of concerned to the Bureau. Henceforth the above discussion would help the management to recognize the needs to improve the Bureaus information systems, the operations and the internal control of NYLB. Apart from its operations and technical improvement, NYLB should improve its management structure because there has been a lack of continuity in the executive management and the senior management structure. This drawback of the organization would make it difficult for the Bureau to gain momentum with initiatives which generally require long terms goals and point of view. There is a need for strategic planning and long term management plan in order to run and administer the security funds which would help the NYLB to gain efficiency and create a economies of scale. The Bureau’s top level management keeps on changing making it difficult to strategies a long term management plan. For example the current Chief Executive Officer is the third to serve the NYLB in the past four years and the Chief Financial Officer is the fourth during the time period. Thus there should be continuity in the upper management level as without continuity there involves a risk of information between the higher level and the middle level management. The Bureau without a common mission and vision, the employees are likely to lose sight of importance of processes and basic necessary functions. The information technology system (ITS) of the Bureau needs to be improved which would help in governing the best practice. The current ITS department should be evaluated along with the resources and the systems needs to be upgraded taking into consideration the cost benefits. Also other operations related to ITS needs to be enhanced in order to provide the Bureau with efficient result. Finally, external review or audit should be considered by the Bureau and also of the actuarial analysis of its funds. Internal audit of the NYLB could evaluate the Security Funds. Reference Faarup, P.K. The marketing framework. Academica. 2010. Keenan, R.M. 2008. What’s wrong with the New York Insurance Liquidation Bureau? November 7, 2011 < http://www.andersonkill.com/webpdfext/MealeysLitigationReport-Dec2008.pdf> New York Liquidation Bureau. Home. 2011. New York Liquidation Bureau. November 7, 2011 < http://www.nylb.org/index.htm> New York Liquidation Bureau-a. About us. 2011. New York Liquidation Bureau. November 7, 2011 < http://www.nylb.org/AboutUs.htm> New York Liquidation Bureau-b. The NYLB Mission Statement. 2011. New York Liquidation Bureau. November 7, 2011 < http://www.nylb.org/mission.htm> NYLB-c. Background. 2010. Annual report of the New York liquidation bureau. November 7, 2011 NYLB-d. Management Discussion and Analysis. 2006. ANNUAL REPORT OF THE NEW YORK LIQUIDATION BUREAU. November 10, 2011 < http://www.nylb.org/Documents/NYLB_AnnualReport_2006.pdf> Porter, M.E. Competitive strategy: techniques for analyzing industries and competitors: with a new introduction. Simon and Schuster. 1998. RSM McGladrey. Executive summary. No Date. STATE OF New York INSURANCE DEPARTMENT. November 14, 2011 < http://www.dfs.ny.gov/insurance/hist/rpt050106_frc.pdf> Read More