Asset-liability management (ALM) is fundamental to insurers, ensuring that assets are structured to meet future liabilities in expected amount and timing, while managing financial risks effectively. This article explores ALM strategies for annuities at different levels of maturity and sophistication, from basic approaches to advanced techniques. The main sections of the paper cover the following:
- What is ALM for annuities?
- ALM strategies by level of sophistication
- Key considerations of having no asset-liability management
- Initial steps: A generic long bond portfolio
- Basic ALM: Duration matching
- Advanced ALM: Cash-flow matching and risk management
- ALM and pricing maturity