A Strategic Asset Allocation (SAA) analysis, leveraging Conning’s Investment Optimization software and expertise, provides critical insights on investment risk and allows insurers to adjust their portfolio strategies to increase investment performance and/or reduce portfolio risk within the bounds of a clearly defined risk appetite. SAA analyses seek to:
- Support the needs of a company’s insurance operations
- Maintain a reasonable risk profile
- Maximize enterprise value over the long term
SAA is the starting point for an effective investment management process. The process begins with an integrated analysis of enterprise risks and rewards using a stochastic testing process which measures the volatility of assets and liabilities under selected assumptions. Key factors considered include:
- Business objectives and risk tolerance
- Regulatory and competitive environment
- Investment risk
- Underwriting risk
- Operating risk
- Accounting implications and tax issues
- Liquidity needs and capital requirements
- Rating agency considerations
We leverage the capabilities of our software suite; GEMS® Economic Scenario Generator, FIRM® Portfolio Analyzer, ADVISE® Enterprise Risk Modeler, and Investment Optimizer to create a financial model of enterprise assets or a full asset-liability model. This process sets the stage for Strategic Asset Allocation and other integrated Enterprise Risk Management analyses.
A series of efficient-frontier model runs are produced by our Investment Optimizer tool . These results provide:
- A risk/reward comparison of alternative investment portfolios
- Pro forma financial statements based on U.S. STAT, U.S. GAAP, IFRS, tax and economic value financial statements, as appropriate, for each alternative portfolio
- Volatility analyses of underwriting and other business risks underlying the risk/reward comparison
We test investment strategy alternatives and identify an optimal asset allocation strategy that meets our client’s objectives and produces the most attractive risk/reward trade-offs.
To learn more about Conning’s SAA process or other strategic advisory services and risk modeling systems, please contact us.