Session 3a ALM in a Volatile Environment. Paul Sandhu, ASA Jonathan Kwan, MBA

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1 Session 3a ALM in a Volatile Environment Paul Sandhu, ASA Jonathan Kwan, MBA

ALM in a Volatile Environment PAUL SANDHU/JONATHAN KWAN Head of Investment Solutions/ Manager, Investment Solutions Conning Asia Pacific Limited Monday 29 th August Introduction The objective is to

2 ALM in a Volatile Environment PAUL SANDHU/JONATHAN KWAN Head of Investment Solutions/ Manager, Investment Solutions Conning Asia Pacific Limited Monday 29 th August Introduction The objective is to describe the benefits and methodology of a dynamic investment solutions to achieve performance objectives in a volatile environment. Motivation Increased volatility of markets requires flexible/higher-response approach. Methodology Utilizes stochastic projections of company state. Optimized allocation adjustments designed to meet specific company objectives. Example Practical example of dynamic asset allocation strategies. 2

3 Investment Process The investment process has varying levels of integration with liabilities and regulations. Based on level of integration with liabilities/regulations, applicable time span and decision making framework, each objective is owned by one or more of the processes below. Risk Reduction APM Sector rotation, stock/bond valuation, fundamental analysis, etc. TAA Incorporates short term market cycles in order to adjust asset allocation to further align with investment objectives. SAA Optimizes the portfolio asset allocation over a longer term horizon incorporating both sides of balance sheet and regulatory/accounting specifications. 3 Solvency to Investment Performance Gross Investment Yield Shows the Gross Investment Return vs. Surplus Ratio Size of bubbles shows relative size of total invested assets for companies Equity-Asset Ratio Gross Investment Yield Shows the Gross Investment Return vs. Solvency Ratio Size of bubbles shows relative size of total invested assets for companies Solvency Ratio 4

4 Narrowing Investment Opportunity & Market Turbulence Bond returns have been volatile in less developed countries and have drifted lower recently Overall investment yields have drifted lower Leads to spread compression issues when this is sustained Over the time series Asia s markets have become more and more correlated with developed markets This leads to lowered benefits from diversification Asia exhibits a higher frequency of extreme events, which leads to a higher capital cost 5 Summary Market volatility and regulatory changes are advancing the need for fully integrated asset management. Risk focused investment solutions better translates directly to the specific performance and risk metrics insurance companies focus on. Solutions are available to help insurance companies achieve their objectives in this changing investment and regulatory environment. 6

5 Biographies Paul Sandhu Head of Investment Solutions Paul is the Head of Investment Solutions at Conning Asia Pacific Limited ( ). He started his career in the life insurance industry as an actuary in the liability management unit at USAA in the US, where he created and managed many of the processes used for SAA/ALM/ERM and annuity pricing. He also created strong processes for re-enforcing the relationship between the asset management and actuarial units. In 2008, he joined Conning and has been working closely with clients to help them with their enterprise risk management and strategic asset allocation. Paul graduated from the University of British Columbia with Honors Bachelors in Science with a specialization in Theoretical Physics, he focused his research on the theory of black holes, where he created and analyzed simulations of a stars evolution into black holes by solving Einstein s equations using numerical techniques. He is an Associate of the Society of Actuaries. Jonathan Kwan Manager, Investment Solutions Jonathan is an Investment Solutions Manager at Conning Asia Pacific Limited ( ). He specializes in capital management and framework implementation. He holds a Bachelor of Business Administration in Finance and Mathematics from the University of Notre Dame, Indiana with a focus on International Business. Contact us: Paul Sandhu Jonathan Kwan Paul.sandhu@hk.conning.com Jonathan.kwan@hk.conning.com Conning Asia Pacific Limited 19/F, LHT Tower, 31 Queen s Road Central, Hong Kong 7 Disclaimer Conning, Inc., Goodwin Capital Advisers, Inc., Conning Investment Products, Inc., a FINRA-registered broker dealer, Conning Asset Management Limited, Conning Asia Pacific Limited, and Octagon Credit Investors, LLC are all direct or indirect subsidiaries of Conning Holdings Limited (collectively, Conning ) which is one of the family of companies owned by Cathay Financial Holding Co., Ltd., a Taiwan-based company. Conning has offices in Boston, Cologne, Hartford, Hong Kong, London, New York, and Tokyo. Conning, Inc., Conning Investment Products, Inc., Goodwin Capital Advisers, Inc., and Octagon Credit Investors, LLC are registered with the Securities and Exchange Commission ( SEC ) under the Investment Advisers Act of 1940 and have noticed other jurisdictions they are conducting securities advisory business when required by law. In any other jurisdictions where they have not provided notice and are not exempt or excluded from those laws, they cannot transact business as an investment adviser and may not be able to respond to individual inquiries if the response could potentially lead to a transaction in securities. Conning Investment Products, Inc. is also registered with the Ontario Securities Commission. Conning Asset Management Limited is Authorised and regulated by the United Kingdom's Financial Conduct Authority (FCA#189316), and Conning Asia Pacific Limited is regulated by Hong Kong s Securities and Futures Commission for Types 1, 4 and 9 regulated activities. Conning primarily provides asset management services for third-party assets. Conning predominantly invests client portfolios in fixed income strategies in accordance with guidelines supplied by its institutional clients. All investment performance information included within this material is historical. Past performance is not indicative of future results. Any tax related information contained within this presentation is for informational purposes only and should not be considered tax advice. You should consult a tax professional with any questions. This material or any information contained herein is not intended to, and does not, constitute an offer to sell or the solicitation of any offer to buy any securities in Japan, Korea, Taiwan or China. For complete details regarding Conning and its services, you should refer to our Form ADV Part 2, which may be obtained by calling us. Legal Disclaimer 2016 Conning Asia Pacific Limited. This document and software described within are copyrighted with all rights reserved. No part of this document may be distributed, reproduced, transcribed, transmitted, stored in an electronic retrieval system, or translated into any language in any form by any means without the prior written permission of Conning. Conning does not make any warranties, express or implied, in this document. In no event shall Conning be liable for damages of any kind arising out of the use of this document or the information contained within it. This document is not intended to be complete, and we do not guarantee its accuracy. This document contains information that is confidential or proprietary to Conning (or their direct and indirect subsidiaries). By accepting this document you agree that: (1) if there is any preexisting contract containing disclosure and use restrictions between your company and Conning, you and your company will use this information in reliance on and subject to the terms of any such pre-existing contract; or (2) if there is no contractual relationship between you and your company and Conning, you and your company agree to protect this information and not to reproduce, disclose or use the information in any way, except as may be required by law. Registered trademarks of Conning, Inc. in the Asia Pacific region are as follows: China, ; Taiwan CONNING ;, ; and Singapore CONNING,,. This material is for informational purposes only and should not be interpreted as an offer to sell, or a solicitation or recommendation of an offer to buy any security, product or service, or retain Conning for investment advisory services. 8

Session 5b Aging Asia 5b.1) Aging Asia: Asset Rich, Income Poor? Key risks to retirement income security and investment implications

Session 5b Aging Asia 5b.1) Aging Asia: Asset Rich, Income Poor? Key risks to retirement income security and investment implications Michael Dommermuth 26/06/2014 Sourced: Manulife Asset Management 1 Aging