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Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA.

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Presentation on theme: "Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA."— Presentation transcript:

1 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

2 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

3 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

4 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

5 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

6 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

7 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

8 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

9 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

10 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

11 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

12 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

13 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

14 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

15 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

16 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

17 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

18 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

19 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

20 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

21 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

22 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

23 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

24 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

25 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

26 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

27 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

28 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

29 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

30 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

31 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

32 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

33 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

34 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

35 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

36 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

37 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

38 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

39 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

40 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

41 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

42 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

43 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

44 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

45 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

46 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

47 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

48 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

49 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

50 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

51 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

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53 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

54 Investment Presentation Example 2003 CAS Research Working Party: Executive Level Decision Making using DFA Michael R. Larsen, FCAS, MAAA

55 2003 CAS Research Working Party55 Goals of Study Review Reinvestment Options Measure Results using Simulation Model Results Risk as Average Loss in Surplus in Worst 1% of Cases over Five Years Return as Average Increase in Policy Holder Surplus at End of Five Years

56 2003 CAS Research Working Party56 Change in Reinvestment Allocation

57 2003 CAS Research Working Party57 DFA Flow Work Comp Grow 5% a year Multi_Peril Grow 5% a year Financial Calculator Starting Policy Holder Surplus 40,000 Corporate Elements Reinsurance Investment Capital MixTaxes Financial Results Simulated over Five Years Analyze Results Measures of Risk Return Change in Policy Holder Surplus

58 2003 CAS Research Working Party58 Model / Assumptions Assumption s Behind Simulation Assume Underwriting Operations Not Affected Ability to take rate changes not driven by investment results Growth rates in exposure does not change Investment Scenario Long run average interest rate of 4% Starting interest rate of 4% Investment Models Short term interest rate model is a mean reversion model Long term rates are a function of short term rates Stock returns modeled as a function of short term rates and interest rate changes Stable relationship between bond and equity market

59 2003 CAS Research Working Party59 Policyholder Surplus Change by Reinvestment Option

60 2003 CAS Research Working Party60 Surplus Change Over Time by Investment Option

61 2003 CAS Research Working Party61 Investment Option Comparison Better Option D Highest Return Less Risk

62 2003 CAS Research Working Party62 Investment Option Comparison Better Option D Highest Return Less Risk

63 2003 CAS Research Working Party63 Investment Option Comparison Better Option D Highest Return Less Risk

64 2003 CAS Research Working Party64 Investment Option Comparison Better Option D Highest Return Less Risk

65 2003 CAS Research Working Party65 Investment Option Comparison Better Option D Highest Return Less Risk

66 2003 CAS Research Working Party66 Investment Option Comparison Better Option D Highest Return Less Risk

67 2003 CAS Research Working Party67 Investment Option Comparison Better Option D Highest Return Less Risk

68 2003 CAS Research Working Party68 Investment Option Comparison Better Option D Highest Return Less Risk

69 2003 CAS Research Working Party69 Investment Option Comparison Better Option D Highest Return Less Risk

70 2003 CAS Research Working Party70 Investment Option Comparison Better Option D Highest Return Less Risk

71 2003 CAS Research Working Party71 Investment Option Comparison Better Option D Highest Return Less Risk

72 2003 CAS Research Working Party72 Investment Option Comparison Better Option D Highest Return Less Risk

73 2003 CAS Research Working Party73 Investment Option Comparison Better Option D Highest Return Less Risk

74 2003 CAS Research Working Party74 Investment Option Comparison Better Option D Highest Return Less Risk

75 2003 CAS Research Working Party75 Investment Option Comparison Better Option D Highest Return Less Risk

76 2003 CAS Research Working Party76 Investment Option Comparison Better Option D Highest Return Less Risk

77 2003 CAS Research Working Party77 Investment Option Comparison Better Option D Highest Return Less Risk

78 2003 CAS Research Working Party78 Investment Option Comparison Better Option D Highest Return Less Risk

79 2003 CAS Research Working Party79 Investment Option Comparison Better Option D Highest Return Less Risk

80 2003 CAS Research Working Party80 Investment Option Comparison Better Option D Highest Return Less Risk

81 2003 CAS Research Working Party81 Investment Option Comparison Better Option D Highest Return Less Risk

82 2003 CAS Research Working Party82 Investment Option Comparison Better Option D Highest Return Less Risk

83 2003 CAS Research Working Party83 Investment Option Comparison Better Option D Highest Return Less Risk

84 2003 CAS Research Working Party84 Investment Option Comparison Better Option D Highest Return Less Risk

85 2003 CAS Research Working Party85 Investment Option Comparison Better Option D Highest Return Less Risk

86 2003 CAS Research Working Party86 Investment Option Comparison Better Option D Highest Return Less Risk

87 2003 CAS Research Working Party87 Investment Option Comparison Better Option D Highest Return Less Risk

88 2003 CAS Research Working Party88 Investment Option Comparison Better Option D Highest Return Less Risk

89 2003 CAS Research Working Party89 Investment Option Comparison Better Option D Highest Return Less Risk

90 2003 CAS Research Working Party90 Investment Option Comparison Better Option D Highest Return Less Risk

91 2003 CAS Research Working Party91 Investment Option Comparison Better Option D Highest Return Less Risk

92 2003 CAS Research Working Party92 Investment Option Comparison Better Option D Highest Return Less Risk

93 2003 CAS Research Working Party93 Investment Option Comparison Better Option D Highest Return Less Risk

94 2003 CAS Research Working Party94 Investment Option Comparison Better Option D Highest Return Less Risk

95 2003 CAS Research Working Party95 Investment Option Comparison Better Option D Highest Return Less Risk

96 2003 CAS Research Working Party96 Investment Option Comparison Better Option D Highest Return Less Risk

97 2003 CAS Research Working Party97 Investment Option Comparison Better Option D Highest Return Less Risk

98 2003 CAS Research Working Party98 Investment Option Comparison Better Option D Highest Return Less Risk

99 2003 CAS Research Working Party99 Investment Option Comparison Better Option D Highest Return Less Risk

100 2003 CAS Research Working Party100 Investment Option Comparison Better Option D Highest Return Less Risk

101 2003 CAS Research Working Party101 Investment Option Comparison Better Option D Highest Return Less Risk

102 2003 CAS Research Working Party102 Investment Option Comparison Better Option D Highest Return Less Risk

103 2003 CAS Research Working Party103 Investment Option Comparison Better Option D Highest Return Less Risk

104 2003 CAS Research Working Party104 Investment Option Comparison Better Option D Highest Return Less Risk

105 2003 CAS Research Working Party105 Investment Option Comparison Better Option D Highest Return Less Risk

106 2003 CAS Research Working Party106 Investment Option Comparison Better Option D Highest Return Less Risk

107 2003 CAS Research Working Party107 Investment Option Comparison Better Option D Highest Return Less Risk

108 2003 CAS Research Working Party108 Investment Option Comparison Better Option D Highest Return Less Risk

109 2003 CAS Research Working Party109 Investment Option Comparison Better Option D Highest Return Less Risk

110 2003 CAS Research Working Party110 Investment Option Comparison Better Option D Highest Return Less Risk

111 2003 CAS Research Working Party111 Investment Option Comparison Better Option D Highest Return Less Risk

112 2003 CAS Research Working Party112 Investment Option Comparison Better Option D Highest Return Less Risk

113 2003 CAS Research Working Party113 Investment Option Comparison Better Option D Highest Return Less Risk

114 2003 CAS Research Working Party114 Investment Option Comparison Better Option D Highest Return Less Risk

115 2003 CAS Research Working Party115 Investment Option Comparison Better Option D Highest Return Less Risk

116 2003 CAS Research Working Party116 Investment Option Comparison Better Option D Highest Return Less Risk

117 2003 CAS Research Working Party117 Investment Option Comparison Better Option D Highest Return Less Risk

118 2003 CAS Research Working Party118 Investment Option Comparison Better Option D Highest Return Less Risk

119 2003 CAS Research Working Party119 Investment Option Comparison Better Option D Highest Return Less Risk

120 2003 CAS Research Working Party120 Investment Option Comparison Better Option D Highest Return Less Risk

121 2003 CAS Research Working Party121 Investment Option Comparison Better Option D Highest Return Less Risk

122 2003 CAS Research Working Party122 Investment Option Comparison Better Option D Highest Return Less Risk

123 2003 CAS Research Working Party123 Investment Option Comparison Better Option D Highest Return Less Risk

124 2003 CAS Research Working Party124 Investment Option Comparison Better Option D Highest Return Less Risk

125 2003 CAS Research Working Party125 Investment Option Comparison Better Option D Highest Return Less Risk

126 2003 CAS Research Working Party126 Investment Option Comparison Better Option D Highest Return Less Risk

127 2003 CAS Research Working Party127 Investment Option Comparison Better Option D Highest Return Less Risk

128 2003 CAS Research Working Party128 Investment Option Comparison Better Option D Highest Return Less Risk

129 2003 CAS Research Working Party129 Investment Option Comparison Better Option D Highest Return Less Risk

130 2003 CAS Research Working Party130 Investment Option Comparison Better Option D Highest Return Less Risk

131 2003 CAS Research Working Party131 Investment Option Comparison Better Option D Highest Return Less Risk

132 2003 CAS Research Working Party132 Investment Option Comparison Better Option D Highest Return Less Risk

133 2003 CAS Research Working Party133 Investment Option Comparison Better Option D Highest Return Less Risk

134 2003 CAS Research Working Party134 Investment Option Comparison Better Option D Highest Return Less Risk

135 2003 CAS Research Working Party135 Investment Option Comparison Better Option D Highest Return Less Risk

136 2003 CAS Research Working Party136 Investment Option Comparison Better Option D Highest Return Less Risk

137 2003 CAS Research Working Party137 Investment Option Comparison Better Option D Highest Return Less Risk

138 2003 CAS Research Working Party138 Investment Option Comparison Better Option D Highest Return Less Risk

139 2003 CAS Research Working Party139 Investment Option Comparison Better Option D Highest Return Less Risk

140 2003 CAS Research Working Party140 Investment Option Comparison Better Option D Highest Return Less Risk

141 2003 CAS Research Working Party141 Investment Option Comparison Better Option D Highest Return Less Risk

142 2003 CAS Research Working Party142 Investment Option Comparison Better Option D Highest Return Less Risk

143 2003 CAS Research Working Party143 Investment Option Comparison Better Option D Highest Return Less Risk

144 2003 CAS Research Working Party144 Investment Option Comparison Better Option D Highest Return Less Risk

145 2003 CAS Research Working Party145 Investment Option Comparison Better Option D Highest Return Less Risk

146 2003 CAS Research Working Party146 Investment Option Comparison Better Option D Highest Return Less Risk

147 2003 CAS Research Working Party147 Investment Option Comparison Better Option D Highest Return Less Risk

148 2003 CAS Research Working Party148 Investment Option Comparison Better Option D Highest Return Less Risk

149 2003 CAS Research Working Party149 Investment Option Comparison Better Option D Highest Return Less Risk

150 2003 CAS Research Working Party150 Investment Option Comparison Better Option D Highest Return Less Risk

151 2003 CAS Research Working Party151 Investment Option Comparison Better Option D Highest Return Less Risk

152 2003 CAS Research Working Party152 Investment Option Comparison Better Option D Highest Return Less Risk

153 2003 CAS Research Working Party153 Investment Option Comparison Better Option D Highest Return Less Risk

154 2003 CAS Research Working Party154 Investment Option Comparison Better Option D Highest Return Less Risk

155 2003 CAS Research Working Party155 Investment Option Comparison Better Option D Highest Return Less Risk

156 2003 CAS Research Working Party156 Investment Option Comparison Better Option D Highest Return Less Risk

157 2003 CAS Research Working Party157 Investment Option Comparison Better Option D Highest Return Less Risk

158 2003 CAS Research Working Party158 Investment Option Comparison Better Option D Highest Return Less Risk

159 2003 CAS Research Working Party159 Investment Option Comparison Better Option D Highest Return Less Risk

160 2003 CAS Research Working Party160 Investment Option Comparison Better Option D Highest Return Less Risk

161 2003 CAS Research Working Party161 Investment Option Comparison Better Option D Highest Return Less Risk

162 2003 CAS Research Working Party162 Investment Option Comparison Better Option D Highest Return Less Risk

163 2003 CAS Research Working Party163 Investment Option Comparison Better Option D Highest Return Less Risk

164 2003 CAS Research Working Party164 Investment Option Comparison Better Option D Highest Return Less Risk

165 2003 CAS Research Working Party165 Investment Option Comparison Better Option D Highest Return Less Risk

166 2003 CAS Research Working Party166 Investment Option Comparison Better Option D Highest Return Less Risk

167 2003 CAS Research Working Party167 Investment Option Comparison Better Option D Highest Return Less Risk

168 2003 CAS Research Working Party168 Investment Option Comparison Better Option D Highest Return Less Risk

169 2003 CAS Research Working Party169 Investment Option Comparison Better Option D Highest Return Less Risk

170 2003 CAS Research Working Party170 Investment Option Comparison Better Option D Highest Return Less Risk

171 2003 CAS Research Working Party171 Investment Option Comparison Better Option D Highest Return Less Risk

172 2003 CAS Research Working Party172 Investment Option Comparison Better Option D Highest Return Less Risk

173 2003 CAS Research Working Party173 Investment Option Comparison Better Option D Highest Return Less Risk

174 2003 CAS Research Working Party174 Investment Option Comparison Better Option D Highest Return Less Risk

175 2003 CAS Research Working Party175 Investment Option Comparison Better Option D Highest Return Less Risk


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