Investment Philosophy

Against a backdrop of transformation, insurance investors are looking at markets through a different lens. Skill, judgement and relationships with trusted partners will be critical in identifying growth opportunities and future-proofing portfolios against the challenges ahead. Our heritage allows us a deep understanding of the challenges and constraints that insurers face. Aviva Investors is part of one of the most secure financial institutions in the UK. As the investment arm of Aviva plc, the UK’s largest insurer, our origins in the London insurance market stretch back more than 300 years.

Supporting our insurance clients:

Insurance heritage

We make it our business to know what’s important to yours. Our long heritage and deep experience in helping our insurer partners to navigate complex capital regimes and regulatory frameworks enables us to create solutions that work assets harder, aiming to optimise the return on your capital.  

Investment strategy

We provide access to our experienced team of former industry executives, actuaries and seasoned insurance professionals. This allows us to understand your investment objectives and work with you to set an investment strategy to meet it.

Sustainable experience

We’re on a mission to create climate of change.  From driving change at the companies we are invested in, to engaging with policymakers and governments to help shape market reform initiatives, we are committed to creating a truly sustainable future.

Investment Solutions for Insurers

We have extensive experience managing insurance portfolios across client portfolios including liability backing and surplus investment strategies. Our dedicated insurance solutions team is fully integrated within Aviva Investors broader investment platform and is devoted to managing customized solutions.

Tailored and implementable

Bespoke solutions aligned to client-specific objectives and constraints.

Client-led

Deep experience across global regulatory and accounting regimes, with a focus on risk-based capital frameworks.

Long-term partner

Supporting clients from solution design through implementation.

Optimising insurance portfolios for resilience, return and capital efficiency

Insurers face a complex challenge of balancing long-term liabilities, meeting regulatory requirements including on capital, and aiming to generate attractive risk-adjusted returns.

Our case studies illustrate how a structured, insight-led approach can help deliver across all these competing priorities and for a wide range of insurers, from life and pensions to property and casualty.

From precise liability matching and capital-efficient structuring, to enhancing portfolio returns and improving diversification, each example highlights how tailored strategies can deliver measurable outcomes.

Together, they illustrate the value of combining rigorous analysis, market expertise, and innovative portfolio construction to support insurers in achieving stronger, more resilient investment outcomes.

Case study 1

UK/Europe L&P | Duration Matching | Maximise Spreads

European L&P insurance company

ClientEuropean L&P insurance company

Investment challengeTo create a portfolio to match the long duration of the insurance liabilities (>20 yrs) with a 0% SCR limit whilst maximising the spread over swaps.

Investment solutionStrategy review included:

  • Economic objective Creation of a portfolio that met the duration and SCR requirements whilst maximising spread over swaps
  • Regulatory objective A KRD matching approach designed to remove the interest rate curve mismatches

A cost/benefit analysis between these two primary objectives was undertaken to determine the benefits of both strategies. This was assessed using a breakeven spread to determine how much the curve could move before the additional spread income is lost.

Implementation and outcomeOptimisation to meet the overall portfolio duration whilst maximising spreads has been determined as the most suitable solution for the client’s requirements. Closer KRD matching was implemented using derivatives.

Figure 1.1: Breakdown of KRD matched portfolio, per cent

Figure 1.2: Key metrics

Key metrics KRD matched portfolio
Portfolio duration (years) 20.6
Portfolio Z-spread (bps) 88.0
Breakeven spread (bps) 4.8

Figure 1.3: Comparison of KRD matched portfolio and liabilities, Euros, thousands

Case study 2

UK/Europe L&P | Optimisation | SAA Proposal

European L&P insurance company

ClientEuropean L&P insurance company

Investment challengeTo review the risk/return profile of the strategy to improve the expected spread over risk-free.

Investment solutionA review of the portfolio including:

  • Assessment of liability profile to determine the appropriate risk/return profile to match liabilities
  • This led to an increase in risk appetite and expected returns on the portfolio by allocating to more riskier assets
  • Increased diversification across the portfolio to allow for changing market conditions to improve the overall resilience of the portfolio returns

Implementation and outcomeAn improvement in the expected return (gross of fees) over risk free of 11% was achievable whilst diversification materially reduced idiosyncratic risk in the portfolio. 

The proposed SAA has been implemented by the client.

 

Figure 2.1: SAA – Material areas of consideration

Key metrics​ Proposed allocation 1​ Alternative allocation​
Portfolio duration (years)​ 9.6​ 9.6​
Portfolio Z-spread (bps)​ 158​ 175​
Breakeven spread (bps)​ 16.5 18.2​
Portfolio credit rating​ A​ A​

Figure 2.2: Original allocation, per cent

Figure 2.3: Indicative new allocation, per cent

Case study 3

UK/Europe P&C | Mandate Expansion | Hedging Strategy

UK P&C insurance company

ClientUK P&C insurance company

Investment challengeTo review the strategic asset allocation of the insurer maximising returns in a capital efficient manner.

Investment solutionA review of the portfolio including:

  • Peer group analysis – highlighting the key differences in asset allocation and hedging strategies
  • Determine correlations in the portfolios with subsidiary companies to determine overall market risk exposure
  • Asset return modelling – to analyse the return/risk profile of the portfolio and determine returns and volatility by asset class
  • Market outlook – our House Views
  • Stress testing – assess the resilience of the overall portfolios, using portfolio, credit spread, and swaps spread stress tests
  • Potential mandate expansion – identification of potential improvements to the strategy including an improved equity hedging strategy

Outcome

  • Relaxing the current IMA restrictions on sovereign and credit sub-portfolios could see an increase in the gross spread above swaps by 31% and 61% respectively and increase overall portfolio diversification
  • Designing of a new equity hedging strategy that is more capital efficient, provides greater market protection and is lower cost

Figure 3.1: Asset classes – mandate expansion, expected 3 year return, per cent per annum

Figure 3.2: Stress testing, expected return, per cent per annum

Target is hypothetical, based on assumptions, and are not guaranteed. Actual results may differ materially due to market, regulatory, operational, and climate-related risks. For illustrative purposes only and not a guarantee of future results.

Source: Aviva Investors. Existing client.

Note: Expected return is shown gross of fees and do not reflect the deduction of advisory fees, expenses, or other costs which would reduce returns.

Investment insights

Investment thinking that brings together the collective insight of Aviva Investors’ teams from across the globe on the key themes influencing markets.

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No one can predict the future. But our quarterly House View sets out the collective wisdom of our investment teams on the current state of global markets – and where they might be heading.

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Key risks

For further information on the risks and risk profiles of individuals strategies, please refer to the relevant documentation.

Investment risk

The value of an investment and any income from it can go down as well as up.  Investors may not get back the original amount invested.

Iliquidity risk

Alternative Income assets are significantly less liquid than assets traded on public markets. Where funds are invested in infrastructure/real estate, investors may not be able to switch or cash in an investment when they want because infrastructure may not always be readily saleable. If this is the case, we may defer a request to redeem the investment.

Credit risk

Bond values are affected by changes in interest rates and the bond issuer's creditworthiness. Bonds that offer the potential for a higher income typically have a greater risk of default.

Real estate risk

Investors should bear in mind that the valuation of real estate/infrastructure is generally a matter of valuers’ opinion rather than fact. 

Explore

Fixed income

Fixed income is an indispensable building block for meeting a variety of investment goals, including income, inflation protection, liability management and capital appreciation.

Learn more "Read more about Fixed income"

Private markets

As one of Europe’s largest private markets investment managers, we have the scale to access the full depth and breadth of private markets.

Learn more "find out more about Private markets"

Liquidity

Offering investors same day, stable value, LVNAV & VNAV, short-term money market funds, which include euro and sterling denominated funds.

Learn more "find out more about liquidity"

Multi-asset & multi-strategy

With over four decades of managing multi-asset and multi-strategy portfolios, we offer bespoke and off-the-shelf actively managed solutions.

Learn more "find out more about multi-asset and multi-strategy"