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What is Asset Allocation?
What is Risk?
 What keeps you awake at night?
- Use measures meaningful to your company
Define goals in a qualitative manner
- Surplus should grow
- The portfolio should not lose a large amount
Translate to quantitative manner
- Surplus should grow by 4% in 5 years
- The largest acceptable loss is -5% in one year.
Sample Risk Measures
RBC test fails
Surplus declines two years in a row
Chance of negative cash flow
Surplus growth below 4%
Reserve / surplus ratio > 3
Net income hurdle rate
Short Term Downside Risk
Long Term Downside Risk
Competitor Risk
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