The Phoenix Group: Asset Liability Management (ALM) with FINCAD



Client: The Phoenix Group 




  • Optimize balance sheet usage
  • Meet Solvency II requirements


  • Robust, flexible modeling to manage investment risk on £7 billion annuity book



This was the ideal pricing and risk platform solution for us. Using FINCAD, we have been able to validate and augment our existing risk monitoring processes."

Prasun Mathur, Deputy Head of Investment Risk & ALM Strategy, The Phoenix Group



The Phoenix Group is the largest UK consolidator of closed life assurance funds. In 2012, Phoenix established a dedicated Financial Management Group (FMG) to develop strategies for investment, asset allocation and ALM. To optimize their ALM strategy, and subsequently their return, FMG chose to bring quantitative financial analytics in-house.


Phoenix FMG group needed to augment their existing actuarial risk monitoring process with: 

  • analytics that could bridge actuarial metrics (measuring Phoenix’s regulatory balance sheet) and asset management metrics,
  • flexibility to create bespoke fixed income asset models that could be applied across various market scenarios
  • and support for measuring performance of the assets adjusted for the regulatory capital they are expected to hold.

In addition, Phoenix needed to be able to interpret and analyze Solvency II regulations and evolve internal models to manage risks. This requires significant computing and modeling power to run through various scenarios and evaluate the best way of calculating capital, subject to Solvency II constraints.


FMG reviewed a range of solutions before selecting FINCAD’s award-winning technology for its flexibility and ease-of-use. FINCAD also had the necessary API to create bespoke models for multiple asset classes and then to perform fast risk and return calculations across numerous scenarios.


Improved Modeling and Risk Measurement: Using FINCAD, the Phoenix Group was able to model all assets within the annuity book and measure risk as actuaries and asset managers do on various regulatory and economic metrics.

Better Investment Decisions: FINCAD overlays Phoenix’s actuarial assumptions into the modeling. This enables more frequent and timely monitoring of risks and returns in the annuity books, and thus, more effective investment decisions. Material reductions in market risks were also noted.

Better Insight: The firm now uses FINCAD to perform scenario and what-if analyses, as well as stress test the portfolios to test liquidity and proposed investment strategies. This helps the firm better react to changes (actual and predicted) in the market and appropriately manage risk levels.

Optimized Hedging: FINCAD is used to model various risk mitigating hedging strategies. This includes calculating the tenor and notional of baskets of swaptions to hedge interest rate exposure, in addition to a variety of DV01 hedging strategies. Thus, the firm can now choose the most appropriate way to optimize its hedges.

"Frequent scenario analysis helps make more accurate, timely and thus, more effective, investment decisions. As a consequence, we have been able to reduce market risks and improve the firm’s balance sheet.

Prasun Mathur, Deputy Head of Investment Risk & ALM Strategy, The Phoenix Group