The objective of the investment function is to maximise the economic value of the Group's investments on a capital efficient basis, and provide consistent investment income within agreed risk parameters.
This objective is pursued through an actively managed Strategic Asset Allocation that is Entity aware and aligned to the Group's Risk Appetite.
Brit Investments maintain a flexible operating model that is mindful of our obligations to our policy holders and cendants and blends internal core competencies with those of external service providers, to ensure that the Group's investment strategies are managed and independently monitored within a cost effective and sustainable control environment.
Asset Management Framework
- Assets backing insurance liabilities (LDI Funds) and shareholders funds (Capital Funds) are separated.
- LDI Fund
- Where practical, assets backing insurance liabilities are duration and currency matched to the liability profile. Growth assets will not be held in LDI Funds.
- Capital Fund
- Shareholders funds are currency matched at the entity level
Earnings & Solvency Risk
- The contribution of investment risk to the Group's earnings volatility, should not dominate the contribution from Insurance risk.
- Investments will be managed within the constraints of the Group's FX, Concentration, Liquidity, and ALM Guidelines.
- The Group has set specific risk parameters including earnings volatility and capital and liquidity needs around its investing activities.
Governance / Authority
- The Strategic Asset Allocation (SAA) is approved by the relevant Boards annually.
- The SAA includes
- Strategic and Tactical (operational) Asset Class Ranges for
- Core Credit
- Enhanced Credit, and
- Investment Guidelines including
- Duration/currency matching benchmarks, and
- Regulatory compliant concentration limits
Over the past few years our Investment portfolio has benefited from falling interest rates and the improving investment grade credit environment. As a result, interest rates are at historically lows levels. In addition to our fixed interest portfolio’s, our allocation to Equities contributed strongly to our performance in 2009 and 2010.
||2.58% (YTD September)
||£92mn (YTD September)
As background, our investments are managed in the context of regulatory capital requirements and in relation to the currency breakdown of our insurance reserves. Additionally, we consider the short- or long-tail aspect of our liabilities to manage the duration of our investments and the needs for liquidity.