AXIS Module - Reinvestment

The AXIS Reinvestment Module can be used at the higher level once total asset and liability cashflows are combined to calculate the net cashflow available for reinvestment. A Reinvestment Strategy can be defined which uses accumulated positive and negative net cashflows on a monthly, quarterly or annual basis to model the sale of existing assets, the purchase new assets at market rates, or combinations thereof.

The amount available for Reinvestment can be invested in the following ways:

1 - Designated Cashflows

• Asset Maturities, Sales or Salvage values can be allocated separately from the aggregate portfolio.

2 - Fixed Dollar Allocations

• Specified fixed dollar commitments to purchase notional assets.

3 - Initial Matching Strategy

• Cash Flow Matching, positive or negative, or
• Duration Matching

4 - Allocate cashflows to reinvestment choices using either:

• Cash Flow Allocation, or
• Target Allocation

5 - Final Matching

• Rebalancing of the dollar duration of the asset portfolio by entering the appropriate side of a SWAP to shorten or lengthen the duration.

Along with the above, there is an option in AXIS to define the Maximum Allocation to specified asset classes for the aggregate portfolio.

Negative cashflows, from operations or portfolio rebalancing, can be handled in one of 3 ways:

• Borrow at a rate tied to the economic scenario
• Purchase negative notional securities, which simulate the sale of an actual inforce asset in terms of yield impact.
• Sell actual inforce assets with realized gain or loss.

Reinvestments assets used in a reinvestment strategy are modeled similarly to in force assets. They include:

• Bonds
  • Callable
  • Putable
  • Non-Callable
  • Sinking Fund Bonds
  • Real Return Bonds
• Mortgages
  • Residential
  • Commercial
• Stocks
• Real Estate
• Stock Options
  • Put
  • Call