Investing at Admin Re^®

The investment strategy for Admin Re^® is therefore governed by deep insight into the dynamics of assets and liabilities, along with their associated diversification effects.

Asset-liability management (ALM) is a method for anticipating and addressing the financial market sensitivities that arise from potential mismatches in duration between assets and liabilities; ALM, along with sound capital management, is therefore essential to Admin Re’s investment process. ALM measures investment risk and performance relative to a benchmark defined by the financial market sensitivities of the best-estimate economic liabilities. Such sensitivities can arise, among other sources, from using market interest rates to gauge the current discounted value of future cash flows. This has particular impact on long-term business lines such as life and pensions: the further cash flows are projected into the future, the higher their sensitivity to changes in interest rates.

Meeting long-term pension obligations requires finding assets that match, as much as possible, in value and duration.

Under current regulations, the actual yield of the asset book is used to discount liability cash flows, having adjusted for credit events. This mutual dependency means that any planned changes to the investment portfolio must also take account of the potential impact on the liability valuation.

It is therefore essential that the asset management team work closely with the actuaries responsible for each specific block of liabilities to understand the impact of proposed actions. This close working relationship allows for a consistent asset-liability management approach focused on both the financial and statutory balance sheets. This is an important consideration for Admin Re^® when optimising existing in-force business lines, but it is of equal importance when assessing the effect of acquiring new portfolios.

For Admin Re financial results see 2012 Financial Report

For more information on longevity see swissre.com