Our investment philosophy is that active management of the group’s assets delivers security to our policyholders and incrementally improves the return to our shareholders. We have a sound framework for determining strategic asset allocation, which also provides the necessary flexibility to make tactical asset allocation decisions based on the short-term expected outlook for markets.
Strategy & Management
The framework for managing Amlin’s investments
encompasses:
- Strategy, risk appetite and benchmark asset allocations are agreed by the Board, and for syndicate funds, by the Board of Amlin Underwriting Limited;
- Our Chief Investment Officer is responsible for implementation of strategy, for consideration of tactical asset allocations to take advantage of changing market circumstances, and for overseeing externally appointed fund managers;
- A committee of executives meets monthly with the Chief Investment Officer to review performance and to consider recommendations for tactical asset allocation changes; and
- An Investment Advisory Panel, involving independent external expertise and executives, meets quarterly to review strategy in the light of any changes in the Group’s risk appetite, economic conditions and the outlook for differing asset classes.
Technical assets
For the syndicate assets our strategic benchmark is based on
matching assets to liabilities in terms of duration. The liability
duration are regularly assessed by our in house actuarial team.
Tactical positions are then taken where these are felt to be
beneficial in terms of the risk/reward outlook. For example cash
will be raised when a bond market is judged to be expensive, and
therefore vulnerable to capital losses.
Corporate assets
For the corporate assets we do not have a liability benchmark.
These assets represent the long term capital of the group and a
longer term view can be taken when making asset allocation
decisions. In order to determine the optimal strategic asset
allocation we use data provided by Watson Wyatt for our asset model
from which we establish the most efficient portfolio mix for our
current risk appetite (known as “Value at Risk”).
Our investment risk appetite will change over the underwriting cycle, increasing as we move into softer underwriting conditions. In November 2004 we doubled the benchmark equity content of our company portfolio to 50% and we intend to explore the benefits of further asset diversification.
Exchange management
We have continued to actively manage the risks associated with
earning profits in foreign currencies.
Currency assets are matched with currency liabilities but exchange risk exists on profits made in each currency. This is mitigated through a policy of converting these currency profits to sterling as insurance risk expires. Given the inherent volatility of some of our business a cautious approach is adopted on the speed and level of sales, but we seek to extinguish currency risk on earned profit during the second year after the commencement of any underwriting year.
For our 2011 performance click here.
