Case Studies: Insurer Investment Forum

The Case Studies presented at SAA’s Forum and Pools Seminar have been lauded for their clarity, applicability and usefulness by our insurer & risk pooling attendees.

We hope these sample case studies from previous Insurer Investment Forums provide better insight into the type of issues addressed at the conference, along with how attendees are able to collaborate with peers. You can view previous Pool Seminar case studies here.

The Insurer Investment Forum XXIV will be held on March 20 - 21, 2024.

The Battle of Intergen: Balancing Low Rates, Risk Assets, and ESG

InterGen is facing some of the lowest interest rates in US history. The difference between the book yield on their core fixed income portfolio and today’s market yield has widened to 200 basis points (2%). However, risk assets have provided some terrific upside returns, but at increased volatility and, correspondingly, increased downside risk.

To add to this situation, InterGen is regulated by the California Department of Insurance, whose Commissioner “has appointed the nation’s first Deputy Insurance Commissioner of Climate and Sustainability in the United States.”

Albert Intergen, Chairman, has convened a Board meeting to specifically discussing several topics.

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The Board’s Decision: Keep or Replace the Investment Manager

Over the last few years, Belichick Mutual Insurance Company has gotten worse than benchmark investment performance from its external fixed income manager, which is also rumored to be conducting less than ethical behavior .

With all of this controversy, senior management is considering a change from its fixed income manager, which, despite these issues, has developed a strong and very responsive relationship with the company over the last ten years.

Does the Board agree that it is time to change its fixed income manager?

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Asset Allocation Concerns: Frequency

Mr. Glazer is now appointed to the Investment Committee and was reviewing the strategic asset allocation process over the past three years. Although state regulations and investment policy allowed prudent flexibility, Mr. Glazer was a bit surprised by the frequency and scope of the strategic asset allocation process.

The process was conducted every year even though the underlying strategic plan and direction of the business had remained consistent for many years. Under closer scrutiny, strategic asset allocation recommendations were often contradictory (especially risk assets) and could swing materially year-over-year.

Wouldn’t this confuse the Board and, even worse, place the investment manager/advisor in a difficult position?

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