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.
Fixed Income Investment Philosophy
- Disciplined, long-term value oriented fixed income investment philosophy
- Focused on value investing, not short-term forecasting
- Obtain a margin of safety
- Brit controls the credit quality decision
- Opportunistic when opportunities present themselves
- Special features
- High yield investing, primarily "fallen angels"
Common Stock Investment Philosophy
- Three to five year time horizon
- Reflects our average holding period
- Purchases may be made when conditions are publicly perceived to be less than ideal and investor sentiment is uncertain or negative
- No short term forecasts of ecomony or stock market
- Selection of stocks based on individual valuation considerations
Margin of safety
- Minimise financial risk through in-depth financial analysis
- Diversify but not at the expense of in-depth understanding
- Minimise price risk by buying below intrinsic value
Asset Management Framework
- Assets backing insurance liabilities (LDI Funds) and shareholders funds (Capital Funds) are separated.
- LDI and Capital Fund are predominently 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 Investment policy is approved by the relevant Boards annually.
- Tactical (operational) Asset Class Ranges for
- Cash and fixed income
- Equities, real estate and hedge fund
- 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.