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Harnessing Treasury Data to Drive Financial Performance


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Data and information are becoming the most valuable asset that treasury and finance teams can use to make better decisions and deliver more advanced recommendations to drive value across the organization. In this session, HCSC and Sempra Energy will talk about what treasury data means for their organizations, why information is so valuable, what they are doing to capture and analyze treasury information, and what technology tools they are deploying to support these business intelligence initiatives.

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Harnessing Treasury Data to Drive Financial Performance

  1. 1. Harnessing Treasury Data to Drive Financial Performance
  2. 2. 2 Panelists PRESENTERS David Deranek, CTP Director Enterprise Treasury Operations Health Care Service Corporation Lance Gartner Cash Management, Manager Sempra Energy
  3. 3. • HCSC is the 4th largest healthcare insurer in the U.S. operates Blue Cross Blue Shield in Illinois, Texas, Montana, Oklahoma, and New Mexico in addition to 30+ operating subsidiaries. • With 16 million health plan members and 20,000 employees, Health Care Service often flies below the radar as a mutually- owned company because it’s not publicly traded and included in the so-called “Big 5” public firms that trade on the New York Stock Exchange. HCSC Overview: 2
  4. 4. HCSC Treasury Metric Company Revenue $62 Billion Scope of Operations Number of Bank Relationships Number of Bank Accounts Number of Investment Accounts Size of HCSC Treasury Team Treasury Operations: Treasury Investments, Acct & Fin Rpt: Treasury Systems: Insurance & Risk: HCSC/Planites Credit Union: Corp Cash Management & Investment Assets $14 Billion Cash Transaction Throughput $120 Billion Annually 14 200+ 100+ 16 20 3 3 19
  5. 5. Treasury Operations  Cash management and cash forecasting  Balance sheet forecasting  Corporate insurance  Treasury IT  Investment accounting Investments  Parent Company investment portfolio  Subsidiary investment portfolio  Pension investment portfolio  Ratings agencies  Credit unions 5 HCSC Treasury has responsibility for several corporate finance functions
  6. 6. Treasury’s Opportunity Drivers for change 1) Affordable Care Act • Passed in 2010 • Significant effects on liquidity and cash planning • Created need to re-engineer treasury 2) Centralization of HCSC treasury function • Brought together treasury functions across 30+ member organizations 3) Treasury as a Strategic Consultant • High Performance Culture, Strategy, and FP&A • Seat at the table with the CFO and Business Leaders 4) Corporate Drive for Increased Efficiency • Do more with less • Leverage Systems & Automated Processes
  7. 7. Challenges • Managing Leadership Expectations • Loss of Reporting Flexibility • Training Required to Support Maintenance • Data Integrity • Highly Technical – Advanced Skill Set 7
  8. 8. The Solutions Treasury Systems developed a platform to centralize all Treasury data • Bring multiple treasury systems and data together in one data hub • Negotiated to receive data files from banks & vendors • Transformed data to develop reports and analytics • Business Intelligence Reporting 8
  9. 9. Treasury Enterprise Reporting (TER) Hub • Database creation, governance, and maintenance • Extract, Transform and Load (ETL) information tools and techniques • Data manipulation and report writing tools and techniques 9
  10. 10. Data Transmission Negotiated to receive data files from banks and vendors • Operating cash accounts • Investment accounts • Money managers 10
  11. 11. Developed Tableau Automated Reporting For … • Cash Positions • Daily Treasury Dashboards • Strategic Investment Allocation • Reconciliations • Treasury Financials • Compliance 11 Reports & Analytics for Business Intelligence Solutions
  12. 12. 12 Example BI Solutions
  13. 13. Example BI Solutions 13
  14. 14. Treasury Operations Seat At The CFO Table 14
  15. 15. Treasury Operations Seat At The CFO Table Benefits of Treasury’s Business Intelligence Tools • HCSC Ventures • Investment Portfolio • Subsidiaries • Mergers & Acquisitions 15
  16. 16. HCSC Ventures • Venture investing is relatively new for HCSC • At the end of 2015, our venture portfolio was about $40 million; over the last 2.5 years, we’ve invested another $140 million • Since inception, we’ve put $155 million in venture investments, and received $175 million of value, including $10 million of distributions in the first half of 2018 • We’re targeting a total venture portfolio of $300 million • From a return perspective, we are seeking to at least double our investment over 5 years, which translates to an internal rate of return (IRR) of 15% • 60% of the venture investments are in funds, while 40% is invested directly in companies 16
  17. 17. Investment Portfolio 17 • As of June 30, 2018, total corporate enterprise invested assets rose to an all- time high • Since 2010, the corporate investment portfolio has grown 37%, an increase of more than $3.6 billion HCSC Working Capital HCSC Capital & Surplus Other health insurance subsidiaries Dearborn National Enterprise HCSC Pension Trust $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Thousands Subsidiary Capital and Surplus Working Capital
  18. 18. Investment Portfolio 18 • Between 2015 and 2018, underlying investment income at HCSC has nearly doubled. • Due to…portfolio has grown, interest rates are up, and change in asset allocation of the portfolio $128 $141 $167 $188 $254 $323 $355 $423 $- $50 $100 $150 $200 $250 $300 $350 $400 $450 2013 2014 2015 2016 2017 2018E 2019E 2020E Net Investment Income Excluding Realized GainsInvestment Allocation Changes Have Increased Portfolio Size +45%
  19. 19. Investment Portfolio 19 HCSC Corporate Portfolio Investment Allocation • Between 2014 and today, we’ve added several new asset classes to the portfolio, meaningfully improving its diversification • As our cash forecasting process has improved, we’ve been able to significantly reduce our cash holdings • We’ve also added to higher risk asset classes, but the overall riskiness of our portfolio remains well below our peers
  20. 20. Subsidiaries • Subsidiary investments have actually created a significant amount of value for HCSC • We’ve invested about $500 million in our existing subsidiaries, including both the initial purchase price and subsequent contributions • Those subsidiaries are now worth an estimated $3.3 billion • That’s a return of 4.4x our investment, and an internal rate of return (IRR) of 12% • However, there’s a big difference in return between our wholly-owned subsidiaries and our partially- owned subsidiaries  Wholly-owned subsidiaries: 2x investment, 6% internal rate of return  Partially-owned subsidiaries: 12x investment, 30% internal rate of return 20
  21. 21. Mergers & Acquisitions • We have the ability to deploy approximately $6 billion of capital over the next few years • Includes about $3.5 billion in available cash, along with $2.5 billion in debt  The $3.5 billion in available cash is after technology systems upgrades, pension contributions, and statutory capital required to fund our organic growth  Assumes an 800% risk based capital (RBC) ratio • Approximately half of the cash available for acquisitions is dependent on tax reform  We’re hesitant to spend this money before it’s in the bank 21
  22. 22. Key Take-Aways • Communicate candidly and “manage-up” • Build strong internal and external relationships • Get the basics right. • Think holistic • Continuously assess risks • Cross-train • Automate and streamline • Network with peers. 22
  23. 23. THANK YOUDavid Deranek, CTP Director Enterprise Treasury Operations 23
  24. 24. 25 On the Road to Harnessing Treasury Data Sempra’s Story
  25. 25. Sempra Treasury Technology Evolution 26
  26. 26. 27 Expanding Our Treasury Data Footprint BEFORE AFTER LEGACY TMS
  27. 27. Drive the Conversation… 28
  28. 28. Our Experience with Kyriba BI Module (Beta / Proof Of Concept) 29 • Report Automation Efforts • Building Insightful Reports
  29. 29. 30 Have a Known Vision and Evolving Strategy >Treasury Technology Focus, Find Operational Efficiencies, Enhance Controls Build System Connectivity >Bank Reporting and ERP Connectivity for Payments and Reconciliation Create Efficient Processes / Look for Automation Opportunities >Manual Payment Workflows Versus ERP Workflows, Automating GL's for Accounting Understand Where Treasury Data Fits into the Big Picture >Talk with your IT Groups, Understand Relevant System Interfaces, Look for Data Opportunities Work with Internal Leadership, Corporate Peers, Kyriba > Seek Feedback, Share What You Have Built, Look for Opportunities to Add Value Be The Catalyst for Change! In Summary
  30. 30. THANK YOU 31