2. With the Provided Information, SAA will Complete a SWOT Analysis on the
Insurer’s Investment Process Value Chain (continued…)
Peer Group Analysis
SAA compares overall allocations and strategies amongst similar insurers and determine if the differences between the insurer’s structure and of those peers make sense or if further evaluation is necessary.
Investment Manager Evaluation, Search and Selection
SAA’s approach to manager evaluation, search and selection is multi-faceted. This process incorporates Investment Manager Reviews, including, where requested, investment manager search using SAA’s proprietary Manager Select database of managers with fixed income insurance specialization.
In the initial stage of the relationship, SAA would conduct an in-depth analysis of each legacy investment manager to determine if they are meeting objectives and to ensure that the company, the investment team and investment philosophy and process are stable and that their competitive advantage is sustainable. This evaluation is typically done through a combination of calls/meetings and review of our database and other data supplied to SAA.
SAA’s process goes beyond simply monitoring what the investment manager does and includes assistance in areas such as compliance, other than temporary impairment, stress testing, and analysis of overall and specific risk exposures, etc.
Performance Measurement and Analysis
SAA’s performance measurement and analysis process goes beyond simple comparisons to the benchmark and reviews yield and total return performance on a risk adjusted basis and against larger databases of manager performance. Most insurers are also keenly focused on downside risk which is important given the risk inherent on the business side of an insurer. Portfolio Benchmarking aims to provide a realistic ‘hurdle’ for the investment manager that is tied directly to the preferred asset allocation. For many insurers, this means a customized versus a generic benchmark.
3. Prioritize and Address the Most Important Issues and Results from the
SWOT Analysis with the Insurance Company
SAA and the insurance company will prioritize the work that needs to be completed to address the most important aspects first. In some cases, the SWOT analysis identifies changes that need to be made immediately with the insurer’s investment manager roster or other aspects of the investment program. These activities can require more time from the company and/or committee given they must approve any proposed changes.