The third installment of Towers Watson’s Property & Casualty Insurance CFO Survey examines CFO perspectives on investment strategies. The survey looks at how companies approach investment management and the rationale for their current investment policy. It also asks how current investment strategy is likely to change in the near future, how portfolio performance is evaluated and how interest rates affect investment strategies.
The survey uncovers some key findings:
-CFOs indicate principal preservation is the most important objective for overall portfolio management, closely followed by total return. Book income, while important, was moderately less important, although it is the closest measure of the alternatives to reported investment income.
-CFO satisfaction with the ability of their portfolios to meet total return targets and book income is mixed, while satisfaction with principal preservation and liquidity is strong.
-Generally, respondents have not moved away from core fixed income, equity and cash investments that have traditionally been the basis for insurers’ portfolios, although almost a third of respondents plan on taking on some additional investment risk over the coming year.
While all CFOs indicated that low interest rates will be their companies’ biggest challenge over the next three years, over half of respondents indicated that financial market volatility and the risk of rapidly rising rates would also be their biggest challenge.
CFOs were asked to describe the primary metric their companies use to express investment risk tolerance. Just over half (52%) use percentage of surplus as a measure. The primary metrics used to describe investment strategy success is total return (72%), followed by a measure against a specified return benchmark(s) (66%) and investment income (50%).
To view the Survey please click here.
|
