SAA is consistently meeting and discussing issues with insurers, investment managers and others involved in the insurance investment process. What have been the common themes and challenges we hear? And how are various insurers approaching these key issues? What might we expect in the financial markets and economy over the next year? And, how might that impact insurers’ future plans? This session serves as the starting point for the day’s sessions, which are focused on helping you succeed in an increasingly challenging investment environment.

1. Alton R. Cogert, CFA, CPA, CAIA, CGMA
President and Chief Executive Officer
March 13, 2014
Insurance Investment Forum XIV
Investing for Insurers:
Review and Preview

2. Investing for Insurers
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3. Investing for Insurers
I want you to go to the window, open it, stick your head
out and yell:
"I'm as mad as hell, and I'm not going to take this
anymore."
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4. Investing for Insurers
More Risk?
Diversification
Better Execution
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5. More Risk?
 How?
 Interest Rate
 Credit
 Liquidity
 Market
Liquidity and Portfolio Choice: A Unified Approach
Time Diversification and Horizon-Based Asset Allocations
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6. More Risk?
 Where?
 Bank Loans (aka Leveraged Loans)
 Emerging Mkt Debt
 High Yield Bonds
 Dividend Focused Equities
 Various Equity Capitalizations
 Real Estate (REITs)
 Int’l Equity
 Convertibles
 MLP’s
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7. More Risk?
 Where?
 Bank Loans
 Dividend Equity
 Small Cap Growth
 Convertibles
 EM Debt
 PE (Fund of Funds)
 Hedge Funds
 Infrastructure
 Global multi-asset/TAA
Eager, Davis & Holmes, LLC Insurance Asset Tracker, Q4, 2013
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8. More Risk?
 When?
 Tactical v Strategic
 Mean Reversion
 Cognitive Limitations
and Biases
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9. More Risk? When?
 Cognitive Limitations and Biases
Making Better (Investment) Decisions
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10. More Risk? When?
 Cognitive Limitations and Biases
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11. More Risk? When?
 Cognitive Limitations and Biases
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12. More Risk? When?
 Cognitive Limitations and Biases
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13. More Risk? When?
 Cognitive Limitations and Biases
13

14. More Risk? When?
 Cognitive Limitations and Biases
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15. More Risk? When?
 Cognitive Limitations and Biases
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16. More Risk? When?
 Cognitive Limitations and Biases
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17. Investing for Insurers
More Risk?
Diversification
Better Execution
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18. Diversification
 Efficient Frontier
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19. Diversification
 Efficient Frontier
 Asset returns normal?
 Correlations fixed?
 All investors rational?
 If everyone did it?
Which Strategic Asset Allocation Model is Best?
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20. Diversification
 “Modified” Efficient Frontier
 Regime shifts
Regime Shifts: Implications for Dynamic Strategies
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21. Diversification
 “Modified” Efficient Frontier
 Factor Based Investing
 Risk Parity Portfolios
Diversification: Still the Only “Free Lunch”?
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22. Investing for Insurers
More Risk?
Diversification
Better Execution
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23. Better Execution
 Active v Passive Investment
 Efficient Markets Hypothesis v Irrational Exuberance
Nobel Contradiction: Fama v Shiller
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24. Better Execution
 The Real Cost of Investment Management
Investment Management Fees Are (Much) Higher Than You Think
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25. Investing for Insurers
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26. Investing for Insurers
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27. Investing for Insurers
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More Risk?
Diversification
Better Execution