Conference on Integrated Risk and Return Management for Insurance Companies May 20-21, 1999 Sponsors: Alliance Capital Management Corporation Brinson Partners, Inc. Cordis Consulting Limited General RE New England Asset Management The Guardian Life Insurance Company of America Milliman & Robertson, Inc. Standard & Poor=s Corp. Tillinghast-Towers Perrin The Measurement and management of enterprise risk in the insurance industry is critical to deployment of capital amongst industry participants. The rapid convergence of financial and insurance markets has motivated an integrated enterprise approach to risk management. This framework recognizes that each component of capital, i.e., business mix, asset portfolio management, financial leverage, dividend policy and, in many cases, reinsurance strategies, is related and must be considered in the context of the overall portfolio of a firm=s capital management initiatives. Consequently, an effective capital management framework must take into consideration the risk, return and cost of capital on both sides of a firm=s balance sheet. Developing a comprehensive risk management system for insurers is complex. Typically, asset risk and operational risk are managed by separate departments using distinctively different toolsbthe tools of actuarial science versus the tools of financial economics. In addition, Value-at-Risk-based methodologies must be adjusted to an insurance-relevant metric such as Asurplus-at-risk." The Asilo@ mentality between product or business lines and investment functions also present challenges. Understanding the trade-off between various capital management strategies is further complicated since decision makers tend to manage towards numerous success measures: after-tax total return on equity, book income, premium growth, or a combined ratio. In addition, each firm may have a different means by which risk is measured throughout the enterprise, such as volatility of surplus, downside risk of surplus, value at risk or volatility of return on equity. As such, enterprise risk and capital management typically evaluates the trade-offs and outcomes of various financial and operating decisions based on the insurer=s measures of success and risk. Firms that embrace an enterprise risk and capital management approach will better understand the economic impact of various operating decisions on the enterprise and the inherent conflicts of managing a business for multiple constituencies such as rating agencies,
regulatory authorities, tax authorities, security analysts or shareholders. These firms can achieve superior risk-adjusted returns on capital, given their market prowess and opportunities, since capital will be efficiently employed throughout the enterprise and risk will be managed in line with agreed upon and sound corporate objectives. The conference continues the periodic tradition at the NYU Salomon Center to bring together leading academics and distinguished practitioners and regulators in the insurance industry realm in order to explore cutting edge concepts and techniques. We are pleased to offer the following program Edward I. Altman, Stern School of Business, NYU Irwin T. Vanderhoof, Stern School of Business, NYU THE PROGRAM Thursday, May 20, 1999 8:00-8:45 Registration and Continental Breakfast 8:45-9:00 Opening Remarks and Greetings George D. Daly, Dean, Stern School of Business, NYU Edward I. Altman, NYU Salomon Center 9:00-9:15 Conference Introduction Irwin T. Vanderhoof, NYU 9:15-10:45 Session I: Methodologies for Integrating Assets and Liabilities Moderator: Irwin T. Vanderhoof, NYU ADynamic Financial Analysis: Life Insurance Application@ Daniel J. McCarthy, Milliman & Robertson, Inc. AEnterprise Risk and Capital Management for the Property-Casualty Insurer@ Joan Lamm-Tennant, Brian McKernan, and Teresa McTague General RE New England Asset Management "The Canadian Approach to Risk and Return Management" Allan Brender, William M. Mercer, Ltd. 10:45-11:00 Refreshment Break 11:00-12:30 Session II: Practical Problems Moderator: Irwin T. Vanderhoof APractical Problems with Integrated Risk and Return Management@
Oliver Peterken, Cordis Consulting Limited "Managing Risk and Capital to Create Shareholder Value" Stephen P. Lowe, Tillinghast-Towers Perrin AInvestment Performance: Decomposing Risk & Return@ Jonathan Nye, Alliance Capital Management Corp. 12:30-2:00 Lunch Luncheon Speaker: Edward I. Altman, NYU AManaging Credit Risk: A Global Challenge@ 2:00-3:30 Session III: Catastrophic Risk Moderator: ACatastrophic Risks of Multi-Fractal Asset Returns@ Adlai Fisher, New York University ACatastrophic Property Casualty Risk@ Glen Meyers, Insurance Service Office, Inc. ACatastrophe Bonds@ Peter Bouyoucous, Morgan Stanley 3:30-3:45 Refreshment Break 3:45-5:00 Session IV: Chief Investment Officer Roundtable Moderator: Edward I. Altman Panel Participants: Frank Jones, Guardian Life Insurance Company Susan Sweeney, Orion Capital 5:00 Highlights and Summary Friday, May 21, 1999 8:00-8:45 Continental Breakfast 8:45-9:00 Opening Comments 9:00-10:45 Session V: Asset Management Issues Moderator: Tony Kao, General Motors Investment Management Corp. "A Three-Factor Interest Rate ModelBThe Ultimate >Black Box=@ David Babbel, University of Pennsylvania and Craig Merrill, Brigham Young University AUpdate on Defaults and Returns in the High Yield Bond Market@ Edward I. Altman, New York University ARisk and Return Characteristics of Emerging Market Debt in Insurance
Portfolios@ John Penicook, Brinson Partners, Inc. "International Real Estate and Equity Investments: How Integrated Are World Markets? A Jarl Kallberg, Crocker Liu, and Anand Srinivasan, New York University 10:45-11:00 Refreshment Break 11:00-12:30 Session VI: Measuring and Transferring Risk Moderator: David Babbel, University of Pennsylvania AEvaluating Reinsurance in an Integrated Risk and Return Framework@ Richard Olsen and Joseph Wallen, General RE New England Asset Management "Risk in the Life Insurance Industry@ Steven Craighead, Nationwide Financial Services "Integrating VAR Example Using Low Discrepancy Points@ Irwin T. Vanderhoof, New York University 12:30-2:00 Lunch 2:00-3:30 Session VII: Managing Balance Sheet Risk by Integrating Assets and LiabilitiesBViews from Regulators, Analysts and Rating Agencies Moderator: Edward I. Altman Panelists: Alice Schroeder, Paine Webber Roy Taub, Standard & Poor=s Shirley Shao, Prudential Insurance Company/NAIC 3:30-4:00 Conference Summary and Conclusion Irwin T. Vanderhoof, New York University The conference will be held in the Schimmel Auditorium on the lower level ("UC level") of Tisch Hall, 40 West 4th Street, New York CityBpart of the Leonard N. Stern School of Business at New York University. The School is accessible via the N, R (to 8th Street), A, B, C, D, E, F (to West 4 th Street) or #6 (to Astor Place) subway routes. Cross streets are LaGuardia Place and Greene Street. The Sheraton New York Hotel & Towers (located on 7 th Avenue and 52 nd Street has set aside rooms for the Conference at special rates. If you wish to reserve hotel accommodations, please contact the hotel directly at (800) 325-3535 or (212) 841-6400
REGISTRATION FORM Conference on Integrated Risk and Return Management for Insurance Companies May 20-21, 1999 Conference Fee: $795.00 (Academics & Government Regulators: $350.00) Conference fee includes all materials, breakfast, lunch, refreshments, and reception Advance reservations are necessary and must be made by Friday, May 14. For additional information, call (212) 998-0700 Fax (212) 995-4220 To register, complete the form and mail together with a check payable to New York University to: New York University Salomon Center, Stern School of Business, 44 West 4th Street, Suite 9-160, New York, NY 10012 Name: Affiliation: Address: City, State, Zip Code: Telephone: Fax Email: Enclosed is a check for (check one) $795 $350