NEAM Insights

There are several key takeaways based on our review: Industry combined ratio increased to 100.7, 3.5 percentage points higher than the prior three-year average, as premium rose 2.7% Net investment declined 2.9% to $47.4 billion, as invested assets increased 3.7% to $1,587.4 billion Fixed income yields declined, while duration increased and credit quality lessened Below investment grade fixed income, equities and BA assets increased 2.1 percentage points to 77.6% of statutory capital and surplus Statutory capital rose 3.6% to $712.5 billion, reflecting net income and unrealized gains exceeding capital withdrawals In periods when underwriting and capital markets are evolving, we believe an Enterprise Based Asset Allocation™ is particularly necessary to manage enterprise risk and capital management needs Read More

Bond yields remain challenged in the major currencies and investors continue to face low yields across sectors in the investment grade universe. Few markets are impacted as severely as the European bond market where short-term underlying rates remain negative, slowly eroding earnings and almost guaranteeing a negative return. With this in mind the search for higher yielding (and positive) paper remains strong with many euro-denominated insurers considering non-traditional sectors such as high yield debt and others content to take exposure in a foreign currency. Read More

To begin with, GDP growth can be reasonably approximated by summing the growth in the labor force and the growth in worker productivity. Historically, a ~1+% growth rate in our labor force, combined with productivity growth of ~2+% have combined to create a real growth rate for the U.S. economy (until fairly recently) of ~3.0%-3.5% (see Chart 1). This simple “rule of thumb” has squared quite well with reported GDP growth since 1950, with few exceptions (see Chart 2). In both of the decades in which the relationship deviated, interestingly enough, extreme economic shocks were involved (Arab oil embargo of the 1970s and the “Great Recession” of 2008/2009) and resulted in extreme bear markets in equities. In any case, over long periods of time GDP growth equates directly to growth in the size and efficiency of the U.S. labor pool. Read More

In the first quarter, optimism, premised on the ability of Trump’s proposed policies to stimulate reflation, defined the market tone, and continued to buoy equities. The reflation beneficiaries, best evidenced by the pro-cyclical sectors including financials and industrials, enjoyed early relative outperformance versus other sectors of the market. Challenges emerged, however, with the unsuccessful attempt to pass the American Health Care Act, the new administration’s replacement for Obamacare. The narrative for the market soured modestly as investors judged this failure as a weak litmus test for Trump’s ability to enact comprehensive tax reform and regulatory relief. While the market remained close to record highs, doubts crept into the investor psyche, as money flows began to be channeled toward more traditionally defensive sectors. Outside of the political realm, the performance of the equity market was underpinned by improving economic data suggestive of a cyclical recovery and higher corporate earnings. Overall, the S&P 500 returned approximately 6% in the first quarter of 2017, posting its best start to the year in four years, and contributed handsomely to the double digit return achieved since Trump’s election. Read More

Impact on Portfolio Optimization? The National Association of Insurance Commissioners (NAIC) presented a proposal of new risk-based capital (RBC) charges for C1 investment risk in 2015. This proposal also introduced additional granularity of fixed income credit rating reporting, from six to twenty categories. Although the current proposal focuses on life insurers, NAIC has stated that the proposed structure of twenty rating categories would also apply to health, and property and casualty insurers. The numeric values of the respective C1 factors might vary by industry segments. Read More

NEW BENCHMARK IN U.S. RESIDENTIAL MORTGAGE CREDIT INVESTMENT One of the watershed outcomes of the financial crisis was the government bailout of Fannie Mae and Freddie Mac (collectively known as Government Sponsored Enterprises or GSEs). This put taxpayer money directly at risk. While continued conservatorship of the GSEs remains a contentious issue, the Federal Housing Finance Administration (FHFA) has continued to focus on reducing the mortgage credit risk assumed by these entities. Read More

Background 2016 was marked by surprise populist votes in both the UK, with Britain’s vote to exit the EU, and the US, with the election of Donald Trump as US President. These political events have had important effects on financial markets. In 2017, Europe faces some key political events. Read More

Many articles discuss enterprise risk management (ERM) and provide compelling reasons to establish and measure risk preferences. Some say that an effective and prudent enterprise risk and capital management process requires a well-articulated risk appetite framework. But, how does one define what that risk appetite should be? Read More

This document provides the user with key investor information about NEAM Global Funds ICAV: GR-NEAM Fund A. DOWNLOAD KIID Read More

While Bob Dylan wrote these lyrics over 50 years ago, they seem to describe well the political climate of today. At a minimum, there is certainly a lot of window shaking and wall rattling going on. As we enter 2017, change is in the air. The new administration has plans to enact significant policy change in a number of areas. The capital markets are in the process of digesting and discounting these changes and we need to consider their impact on our interest rate outlook and fixed income strategy for the year. Read More