Asset Liability Matching (ALM)

  • The situation is always very fuzzy without a great deal of background knowledge as to what the value of the assets is in their case, and how it matches up against the liabilities.

--  Thomas S. Sutton (Pacific Life / ACLI)

  • Insurance Company Insolvencies

Let me be elementary to begin.

  • Asset/liability matching in its purest form likely means that we purchase assets such that whenever cash is needed to meet obligations, those assets will provide that cash.
  • However, in the real world, we are going to be mismatched either because we are not able to match 100% or because we make a corporate decision to be unmatched. 

1990 - RATING AGENCIES AND ASSET/LIABILITY MATCHING, Society of Actuaries - 18p

  • Assumptions regarding long-term expected returns play a critical role in Asset/Liability Management (ALM) of financial institutions.
  • This article questions the validity of assumptions regarding long-term expected returns used by many financial institutions at the present time.

2003 - Are We In A Different Market Paradigm?, Society of Actuaries