INTEGRATING INVESTMENT & ASSET LIABILITY MANAGEMENT IN PT. ASURANSI ORANGE

• Main Author: Syuhada, Fikri
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/63490
• Institution: Institut Teknologi Bandung

PT. Asuransi Orange is a general insurance company in Indonesia with total asset of IDR 1 trillion and investment assets of IDR 527 billion in 2020. Given the significant size of investment assets compared to total assets, investment management including the investment strategic asset allocation plays important role in determining the company financial performance both the profit and ability to meet liabilities to customers. Despite of that PT. Asuransi Orange doesn’t have any written investment policy on long-term strategic investment asset allocation yet which result in suboptimal investment return and higher risk for the company. This research aims to solve the problem by determining the optimal strategic asset allocation through the integration of investment and asset liability management (ALM) policy PT. Asuransi Orange and give the recommendation on the implementation. The research begins by identifying factors that could affect the strategic investment asset allocation such as investment objectives, regulatory requirement, process, and governance that documented in the investment policy as well as asset – liability (ALM) policy and strategy of the company. Based on the assessment of the factors above the research found that current investment policy is not integrated with ALM policy and strategy of the company which result misallocation in the historical strategic investment asset allocation versus liabilities, hence exposed company to liquidity and interest risk in meeting the liabilities. To integrate the investment and ALM policy as well and derive the optimal strategic investment asset allocation, the liability driven asset allocation is use. The liability driven asset allocation divided the company investment assets into ALM-related investment assets and Non ALM-related investment assets. The ALM-related investment assets are the investment assets required to mitigate the interest rate risk and liquidity risk of the liabilities, hence the ALM-related investment assets portfolio is constructed based on the amount and the risk profile of the liabilities. The rest of investment assets then will be allocated to no ALM-related investment assets that manage with the goal to achieve company target return with minimum variance, hence the portfolio construction will be based on Markowitz Mean-Variance Optimization method with the help of Microsoft Excel Solver. Combining the ALM – related and non ALM-related portfolio will yield the optimal investment strategic asset allocation for PT. Asuransi Orange. The research shows that PT. Asuransi Orange need to increase asset allocation to government bond and corporate bonds in exchange of time deposits The research then continue with the recommendation to implement the proposed investment strategic asset allocation including the adjustment in the investment policy as well as digitalization of investment process and governance to support the new strategic investment asset allocation.