INTERNATIONAL INSURANCE COMPANY
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INTERNATIONAL INSURANCE COMPANY

International insurance company – Optimizing strategic asset allocation

The problem

  • The company struggled to maintain sufficient net income margin in a low credit spread environment
  • Urgently needed to improve earnings while staying within risk appetite boundaries and protecting solvency 
  • Contemplated  high yield strategies as a solution

THE SOLUTION

Straterix’s analytical solution was used to analyse and optimize company’s balance sheet and income statement:

  • Analyzed the current and various contemplated alternative asset portfolios,  under thousands of scenarios
  • Worked with the client to interpret the outcomes and arrive at robust, optimal allocation strategies

The business case

  • Decide on an optimized  investment strategy that is appropriate for a wide variety of market environments
  • Adjust risk limits dynamically to increase earnings within stated risk appetite boundaries

The results

  • Demonstrated that expected returns on high yield indices is lower than treasury yield. This was caused by low credit spreads not covering expected losses in high-yield bonds
  • Client increased yields by giving up some liquidity in their portfolio and, in special situations, investing in high yield
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