Improved a Collateral Valuation Process for a Global Insurance Firm to Create Better, More Efficient Reporting

A major insurance and financial services firm with a portfolio of 850 commercial loans had utilized investment managers and lending/underwriting teams to perform annual collateral valuations on its assets. They determined risk-based capital set-asides for loans, and provided reporting on debt risk to auditors, regulators and investors. The effort involved a significant commitment of manpower and time, resources that would be better spent on portfolio management and client relationships. In addition, while the asset managers had broad industry expertise, they were not necessarily valuation specialists with appraisal qualifications. The firm ran the risk that accountants and regulators would flag certain assets and, at best, require additional rounds of review or documentation; or at worst, require the firm to set aside more risk-based capital for assets, reducing funds allocated for new investment. The firm decided to seek an outside partner to provide annual collateral valuations offering greater accuracy and independence, and more credibility with regulators, auditors and investors. 

The firm engaged SitusAMC to perform a 60-day pilot valuation of 267 assets. SitusAMC’s real estate valuations team quickly established a structure and plan for execution that included Argus cash-flow modeling; and set up a shared server system to allow both parties to track property status in real time. SitusAMC used the input to prepare comprehensive reporting on both individual property and portfolio performance, organized into a single format, giving asset managers a holistic view. 

SitusAMC offered higher-quality, more insightful information for the client. This enabled more strategic decision making around asset risk ratings, reserve set-asides, loan renewals and asset disposition, ultimately reducing risk. Additionally, outsourcing gave the firm’s asset managers more bandwidth to focus on portfolio performance and client relationships; gave auditors and regulators confidence that valuations were transparent and independent; and provided the flexibility to scale resources up or down to align with economic and real estate cycles. The success of the pilot led the firm’s credit risk managers to recommend outsourcing the entire 850-asset portfolio to SitusAMC.​