ALM Tianjin Presentation

42 Pages·2005·1.08 MB·English

by  Eric Lu

The Evolution of ALM in Asia
Some Food For Thought
Mark Saunders, FIA, FASI, FSA
Principal & Managing Director, Asia
Tillinghast Financial Services Business Leader, Asia-Pacific
June and July 2005
Joint Regional Seminar in Asia on Asset Liability Management
Beijing, Hong Kong, Taipei and Singapore
Note that this presentation is incomplete without the accompanying
supplementary oral briefing
©2004 Towers Perrin
Agenda
1. Introduction
2. Evolution
3. Do you really understand your business?
4. Best Practice – Financial Management Framework
5. Understanding Profitability and Value -- revisited
6. Some Key Points
7. Best Practice ALM
8. Concluding Remarks
2
©2004 Towers Perrin
1a. Today’s Speaker – Introduction
Mark Saunders FIA, FASI, FSA
Mark Saunders is a Principal of Towers Perrin and Managing Director of Tillinghast’s
financial services business operations in Asia-Pacific. He is a member of
Tillinghast’s Leadership Council.
Mark has hands-on in depth experience of working in Asia since 1989 (firstly in Korea
and been permanent resident in Hong Kong since 1994). Since joining Tillinghast
he has led numerous high profile assignments for insurers throughout Asia. Mark
is a leading practitioner of appraisal value determination of Asian insurers having
valued more than 100 companies.
Prior to joining Tillinghast, Mark started his career in the insurance industry in the UK
in the 1980’s and was the Chief Executive of the Asia-Pacific operation of UK life
insurer, Clerical Medical Investment Group (CMI) and an Executive Director of the
Boards of CMI Financial Management Services and Coryo-CM (CMI’s joint venture
in Korea).
Mark undertakes Appointed Actuary duties for Hong Kong and Singapore life insurers
(he has been Appointed Actuary of six companies) requiring in-depth knowledge
of the operations and financial management experience and skills. He has also
undertaken High Court-required Independent Actuary duties for business transfers
and Expert Witness assignments for insurers successfully providing Expert
Witness testimony in the Court of First Instance in Hong Kong.
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©2004 Towers Perrin
1b.
Speaker -- Introduction (continued)
Mark provided the actuarial Expert Opinion in the Prospectuses in December 2003 for the ground-
breaking IPO of China Life’s dual listing in New York and in Hong Kong. He was also the Expert
Actuary of the Actuarial Consulting Report in Great Eastern’s Circular to Shareholders in relation
to OCBC’s voluntary unconditional offer for all Great Eastern shares in May 2004.
Mark has undertaken memberships of various insurance-related, regulatory and professional
Committees such as:
(cid:132) Member of the Insurance Advisory Committee of the Hong Kong SAR, a Statutory body
overseeing the insurance industry and established under the Insurance Companies Ordinance
(cid:132) Member of the Hong Kong SAR Securities and Futures Commission Committee on Investment-
Linked Assurance and Pooled Retirement Funds
(cid:132) Member of the China Insurance Regulatory Commission (“CIRC”) Task Force for Economic Value
Reporting
He is a regular speaker and chairperson at conferences and seminars as well as author of numerous
articles and papers relating to the Asian insurance industry.
Mark is a Fellow of the Institute of Actuaries (UK), a Fellow of the Actuarial Society of India and a
Fellow of the Society of Actuaries (US), and a Fellow member of both the Actuarial Society of
Hong Kong and the Singapore Actuarial Society. He has both a BSc (Honours) degree and Post
Graduate Certificate of Education in Mathematics from Manchester University, UK.
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©2004 Towers Perrin
1c.
I am going to cover today ….
(cid:132) ALM
(cid:132) Theory and Practice
(cid:132) Evolution in Asia
(cid:132) Best Practice
(cid:132) Investments
(cid:132) Profitability and Value
Profitability &
Investments
Value
ALM
5
©2004 Towers Perrin
Agenda
1. Introduction
2. Evolution
3. Do you really understand your business?
4. Best Practice – Financial Management Framework
5. Understanding Profitability and Value -- revisited
6. Some Key Points
7. Best Practice ALM
8. Concluding Remarks
6
©2004 Towers Perrin
2.
Fundamental problem and driver of ALM in Asia
(cid:132) “Negative Interest Spreads”
(cid:132) What? When? Where?
(cid:132) Why?
(cid:132) How?
(cid:132) Do you know how BIG this problem is?
(cid:132) Japan
(cid:132) Korea
(cid:132) Taiwan
(cid:132) China
(cid:132) ….
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©2004 Towers Perrin
Agenda
1. Introduction
2. Evolution
3. Do you really understand your business?
4. Best Practice – Financial Management Framework
5. Understanding Profitability and Value -- revisited
6. Some Key Points
7. Best Practice ALM
8. Concluding Remarks
8
©2004 Towers Perrin
3. Do you really understand your business?
Some Food For Thought
(cid:132) How good are your Financial Management (Reporting) Systems (Processes)?
(cid:132) Do you (and your stakeholders):
(cid:132) Know how much your business is worth?
(cid:132) Know what makes you money and what loses you money?
(cid:132) Truly understand your sources of profit (loss)?
(cid:132) Know how well you are managing your in-force business?
(cid:132) Know how profitable your new business is?
(cid:132) Know how efficiently you are managing your capital?
(cid:132) Understand your largest risk exposures (and so how they are changing)?
(cid:132) Evaluate options for managing your business and risk responsibly?
(cid:132) Know whether you are optimising returns for your risk appetite/profile?
(cid:132) Know how close you are to best practices?
(cid:132) Know whether your value assessment/reporting methods:
− provide reasonable comparisons between different lines of business?
− help you properly price your new products?
− adequately allow for costs of options and guarantees?
− adequately allow for risk and cost of capital?
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©2004 Towers Perrin
Agenda
1. Introduction
2. Evolution
3. Do you really understand your business?
4. Best Practice – Financial Management Framework
5. Understanding Profitability and Value -- revisited
6. Some Key Points
7. Best Practice ALM
8. Concluding Remarks
10
©2004 Towers Perrin