© STRATEGIC ASSET ALLIANCE, INC. Document not to be reproduced without the explicit consent of SAA. Thinking Inside the Risky Bucket March 19 th , 2015 Mr. Alton Cogert, CFA, CPA, CAIA, CGMA - President and Chief Executive Officer Mr. Daniel G. Smereck - Managing Director
Thinking Inside the Risky Bucket
Jul 17, 2015
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© STRATEGIC ASSET ALLIANCE, INC. Document not to be reproduced without the explicit consent of SAA.
Thinking Inside the Risky Bucket
March 19th, 2015
Mr. Alton Cogert, CFA, CPA, CAIA, CGMA
- President and Chief Executive Officer
Mr. Daniel G. Smereck
- Managing Director
Where are my peers taking risks?
What should be considered?
How to determine risk appetite?
2
Thinking Inside the Risky Bucket
WHERE ARE MY PEERS TAKING RISKS?
3Source: Strategic Asset Alliance, SNL
P/C INSURERS
4
5
Bonds Rated BBB/Surplus – P/C
Source: Strategic Asset Alliance, SNL
*NAIC bonds rated 2
6
High Yield/Surplus – P/C
Source: Strategic Asset Alliance, SNL
*NAIC rated bonds 3-6
7
Common Stock/Surplus – P/C
Source: Strategic Asset Alliance, SNL
8
Risk Assets/Surplus
Source: Strategic Asset Alliance, SNL
*Risk assets include High Yield, Common Stock, Preferred Stock, & Schedule Ba
9
Financial Leverage – P/C
Source: Strategic Asset Alliance, SNL
*Total Liabilities/Surplus
10
Operating Leverage – P/C
Source: Strategic Asset Alliance, SNL
*Net Premiums/Surplus
LIFE INSURERS
11
12
Bonds Rated BBB/Surplus - Life
Source: Strategic Asset Alliance, SNL
*NAIC bonds rated 2
13
High Yield/Surplus - Life
Source: Strategic Asset Alliance, SNL
*NAIC rated bonds 3-6
14
Common Stock/Surplus - Life
Source: Strategic Asset Alliance, SNL
15
Risk Assets/Surplus - Life
Source: Strategic Asset Alliance, SNL
*Risk assets include High Yield, Common Stock, Preferred Stock, & Schedule Ba
16
Financial Leverage - Life
Source: Strategic Asset Alliance, SNL
*Total Liabilities/Surplus
17
Operating Leverage - Life
Source: Strategic Asset Alliance, SNL
*Net Premiums/Surplus
HEALTH INSURERS
18
19
Bonds Rated BBB/Surplus
Source: Strategic Asset Alliance, SNL
*NAIC bonds rated 2
20
High Yield/Surplus
Source: Strategic Asset Alliance, SNL
*NAIC rated bonds 3-6
21
Common Stock/Surplus
Source: Strategic Asset Alliance, SNL
22
Risk Assets/Surplus
Source: Strategic Asset Alliance, SNL
*Risk assets include High Yield, Common Stock, Preferred Stock, & Schedule Ba
23
Financial Leverage
Source: Strategic Asset Alliance, SNL
*Total Liabilities/Surplus
24
Operating Leverage
Source: Strategic Asset Alliance, SNL
*Net Premiums/Surplus
GOVERNMENT RISK POOLS
25
SAA Governmental Pooling Clients
o 15 Clients (12 Primary / 3 Reinsurers)
o 25 Portfolios
o $2.6B In Assets
$2.2B Core Fixed Income (85%)
$0.4B Risk Assets (15%)
26
Peer Analysis Overview
27
Risk Asset Allocation: % of Members Equity
28
Risk Asset Allocation
29
Investment Leverage & Risk Asset Allocation
30
Risk Asset Allocation & Fixed Income Duration
WHAT SHOULD BE CONSIDERED?
31Source: Strategic Asset Alliance, SNL
© STRATEGIC ASSET ALLIANCE, INC. Document not to be reproduced without the explicit consent of SAA.
Asset classes not noted in Q3 US/Canada Searches that we have seen:
o Bank Loans
o Commercial Mortgage Loans
o High Grade High Yield Bonds
o Private Placements
Also seen, as in Q3 US/Canada Searches:
o Dividend Equity
o Emerging Market Equities
o Various Style Box Equities – US and Non-US – ETFs/Index Funds
What SAA has seen…
© STRATEGIC ASSET ALLIANCE, INC. Document not to be reproduced without the explicit consent of SAA.
Unconstrained Bond Strategies
Varied ETF Strategies
‘Smart’ Beta Strategies
‘New and Improved’ Structured Securities
Other
But there will be more to consider, including…
HOW TO DETERMINE RISK APPETITE?
34Source: Strategic Asset Alliance, SNL
35
Drawdown Analysis
36
A ‘More Reasonable’ Comparison
37
A ‘More Reasonable’ Comparison…?
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