Benefits of Convertibles for Insurance Investors:
Capital Efficiency– Convertibles are treated as bonds for Risk Based Capital charges. They hold up far better than equities during volatile markets.
Diversification– Convertibles have low correlation to Bonds which is a benefit to Bond heavy investments.
Interest Rate Sensitivity– Convertibles perform relatively well when interest rates rise.
Asymmetry– Due to the convex nature of the return profile, convertibles capture most of the upside of the movement of the underlying equity and much less of the downside movement.
Risk Management– Portfolio Risk Exposure can be fine-tuned to meet specified goals.
Investment Grade– We can build a portfolio with an overall investment grade rating if required.