Schroders PLC · LSE:SDR
Schroders — Debt Investor Presentation (February 2014)
22 slides from Schroders's debt investor presentation, February 2014
Slide 1: Schroder GAIA Cat Bond
Schroder GAIA Cat Bond For professional investors and advisors only.
Slide 2: The case for insurance-linked securities (ILS)
The case for insurance-linked securities (ILS) Benefits for investors Attractive return profile – 8.5% annualised return with a volatility of 2.6% – ILS attract a premium over corporate bonds with similar default probabilities Low correlation to equities, fixed income and the business cycle – Di
Slide 3: The case for ILS
The case for ILS Attractive returns and excellent diversification Hedge High Yield Cat Bonds Equities IG Bonds Commodities Funds Bonds Ann. return (USD) +8.6% +6.1% +5.7% +2.2% +11.6% +9.7% Volatility (p.a.) 2.9% 15.1% 6.8% 5.0% 23.5% 9.6% % positive months 92% 65% 70% 65% 61% 75% Cat bonds positive
Slide 4: What risks are transferred
What risks are transferred ILS can be broader than just cat bonds Catastrophe risks – largest segment, high level of standardisation - Hurricanes, tornados, typhoons (US, Japan) - Winter storms (Europe) - Earthquakes (US, Japan, Europe) - Other (e.g. Australian cat risks) Other non life-related
Slide 5: Example of a cat bond
Example of a cat bond Insured event: hurricane risk Everglades Re Ltd. 2013-1 A Claims paying sources: – Term: 3 years – Risk: Florida Hurricane Everglades Re 2013-1 A Everglades Re cat bond – Coupon: money market yield + 10.0%, paid $250 m quarterly Traditional reinsurance – Rating (S&P): B $604 m
Slide 6: Performance impact from single events
Performance impact from single events Cat bonds are a relatively stable asset class Impact of events on the Swiss Re Global Cat Bond Index 280 260 240 220 200 Hurricane Sandy 180 Hurricane Katrina, followed by Rita & Japan earthquake 160 Wilma and tsumani 140 Hurricane Ike, 120 default Lehman Bros 1
Slide 7: Why Schroders & Secquaero
Why Schroders & Secquaero Our unique selling points Team 15 full-time ILS professionals One of the best resourced ILS teams in the industry Industry expertise Strong insurance background: Secquaero founders launched first cat bond in ‘94 Unique network: Secquaero advises top (re)insurance co
Slide 8: Our set-up
Our set-up Dedicated ILS team of 15 supported by wider organisation Advisory Investment management Trading and support Secquaero Advisors Schroder ILS Team Fixed Income Trading Dirk Lohmann & Peter Boller Daniel Ineichen Nick Robinson Team of 11 Team of 4 Team of 6 Portfolio management Cat bond
Slide 9: Schroder GAIA Cat Bond
Schroder GAIA Cat Bond Strong track record in cat bond investing Fund features: Performance objective: 3m Libor + 6% p.a. Investing in most liquid part of ILS market, tradable 3x p/month Actively managed, risk-controlled approach Strong track record since May 2011 Benefits: Great diversifi
Slide 10: Schroder GAIA Cat Bond: Positioning as at December 2013
Schroder GAIA Cat Bond Positioning as at 31 December 2013 Exposure by market Natural catastrophe risks – contribution (% of NAV) by peril-zone (% expected loss) 100% 97.8% Contribution Maximum Region / peril to EL (%) (%) 80% California earthquake 8.0% 20% 60% Other US earthquake 5.6% 15% 40% Florid
Slide 11: Strong track record in managing cat bonds
Schroder GAIA Cat Bond Strong track record in managing cat bonds Schroder GAIA Cat Bond vs key competitors 120 118 116 Schroder GAIA Cat Bond 114 LGT Cat Bond Fund 112 Solidum Cat Bond Fund 110 Falcon ILS Fund (UCITS) 108 CS Low Vol Fund 106 Plenum Cat Bond Fund (UCITS) 104 GAM Fermat ILS Fund (UCIT
Slide 12: Fund summary
Schroder GAIA Cat Bond Fund summary Fund name Schroder GAIA Cat Bond Regulatory regime Luxembourg UCITS Currency USD (base currency), CHF and EUR hedged share classes Performance objective 3 month US Libor + 6% p.a. net of fees Inception date May 2011 (inception date NGAR Secquaero ILS fund*) • Acti
Slide 13: Appendix
Appendix #8 Schroders
Slide 14: Structure of a cat bond
Structure of a cat bond Tradable ILS Collateral Account Risk premium (approx. 3 – 5 x loss occurance Coupon = (risk premium & probability) money market return) Issuer (Re-)insurer Investor / Fund reinsurance treaty (SPV) investment Occurance of an insured event? Loss payment No: 97% – 98% probabilit
Slide 15: From opportunity to portfolio holding
From opportunity to portfolio holding Drawing upon strengths of two organisations Feedback Trading opportunities Portfolio ILS Strategy Sourcing Underwriting Implementation construction & Portfolio Group transactions Committee management Meets weekly or Communication with Review analysis Validation
Slide 16: Risk management
Risk management Systems used in managing ILS portfolios Analysis of catastrophe risks Analysis of cat risk transactions Risk decomposition Scenario analysis Portfolio analysis SPOT Monitoring of portfolio risk limits and parameters Scenario analysis and stress testing Investment restrictio
Slide 17: Why (re)insurers issue insurance-linked securities
Why (re)insurers issue insurance-linked securities 4 ways to manage Solvency II capital requirements Raise capital 1) Equities 2) Subordinated debt Transfer risks 3) Reinsurance 4) Cat bonds - limited number of reinsurers, - unlimited number of counterparties, relationship driven sometimes no direct
Slide 18: Price development in the cat bond market
Price development in the cat bond market Yields in historical context Changes in yield mainly driven by insurance cycle 14 12 Japan earthquake and tsunami 10 8 6 Hurricane Ike, Hurricane Sandy Hurricane Katrina, Lehman Brothers 4 Rita & Wilma yields start to stabilise here 2 0 Jan-04 Jan-05 Jan-06 J
Slide 19: Price development in the ILS market
Price development in the ILS market Yields in historical context Changes in yields mainly driven by insurance cycle Low insured losses in recent years mean abundant capital to underwrite insurance risks Global Property Catastrophe RoL index Significant insured losses (USD bn) Source: Guy Carpent
Slide 20: Risk diversification within cat bond universe
Risk diversification within cat bond universe Exposure driven by regions with high insurance density and wealth accumulation 1% 3% Diversification within US 2% Wind possible in many different ways! 16% 59% 17% 2% US Hurricane (59%) US Tornado (2%) US Earthquake (17%) EU Winterstorm (16%) Japan Earth
Slide 21: Important Information
Important Information The information and opinions contained in this document have been obtained from sources Schroders considers to be reliable however these have not been checked or verified by Schroders. The information contained herein is provided as a guide only and any persons who may receive
Slide 22: Important Information
Important Information Any security(s) mentioned above is for illustrative purpose only, not a recommendation to invest or divest. This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended to provide, and
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