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Interest rates have never been lower and there are few reasons to expect them to grow in the near future. With this challenging environment, and from a corporate governance perspective, it may be an appropriate time for an independent review.

A SWOT Analysis will identify internal strengths, weaknesses, external opportunities and threats to each component of your insurer’s investment process. We find a SWOT Analysis to be the best way to develop a blueprint and prioritization of how and where to improve the investment process. Conducting a SWOT Analysis consists of the following steps:

1. Obtain Information Regarding Financial Condition and Investment Portfolio

These documents include: financial statements, cash flow forecasts, claim payment information, investment policy statement, information related to the regulatory framework that the company operates under (state regulation citations for review), most recent board report, investment management and custodian agreements and contacts, quarterly investment management reports, quarterly return streams for all portfolios, holdings for all portfolios, etc.

At this time we would also have initial conversations with the insurer’s management or investment committee to determine company objectives and constraints. Though this seems like a great deal of information, most insurers are able to assemble and provide this information within a few days.

2. With the Provided Information, SAA will Complete a SWOT Analysis on the
Insurer’s Investment Process Value Chain

The SWOT analysis will identify internal strengths and weaknesses, as well as external opportunities and threats to each component of the insurer’s investment process. We find that the SWOT analysis is the best way to set out a “road map” to guide the work and the relationship with the insurance company.

As outlined in the graphic on the next page, these components include the following:

Strategic Asset Allocation
SAA reviews the impact of different allocations in a risk management framework by modeling various asset class combinations.

“Best Practices Review” of the Investment Policy
SAA utilizes a sample ‘best practices’ approach to an insurer’s investment policy. Importantly, we know that a ‘best practices’ investment policy for an insurer must have these key components:

•  Preamble – Who? What? Roles and Responsibilities
•  Investment Return and Management Objectives
•  Asset Allocation and Risk Management Guidelines
•  Investment Performance and Reporting
•  Investment Policy and Guidelines Evaluation

Relevant state and other regulations, as well as other factors such as tax situation (if applicable), are also incorporated into the strategic asset allocation and investment policy development process. The investment policy is reviewed at least annually or more frequently if changes to the investment portfolio or overall business require modifications.

Peer Group Analysis…

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