• About AAM
  • Customized Investing
  • Specialty Services
  • Industry Insight
  • Educational Videos
  • Enterprise Risk Management
  • Dynamic Tax Analysis
  • Investment Accounting
  • Peer Analysis
  • Additional Services

Dynamic Tax Analysis

With our tax advantaged strategy, AAM assists taxable Property & Casualty insurers in finding the right mix of taxable and tax-exempt assets for any given market environment. Dynamic Tax Analysis adds another layer of customization to this strategy. It determines the portfolio allocation that will deliver the maximum level of after-tax net income to your entire enterprise, including non-insurance subsidiaries, while identifying the likelihood that your company will be subject to the Alternative Minimum Tax (AMT).

Unlike many industry tax models that rely solely on static operating forecasts, AAM’s insurance strategists work closely with client management to understand how key operating indicators can fluctuate from year to year. We incorporate the potential impact of best- and worst-case scenarios by constructing probabilistic distributions around key operating forecasts such as earned premiums, incurred losses and loss expenses.

These dynamic operating inputs are combined with AAM’s capital market research, which identifies long-term relative value between taxable and tax-exempt fixed income securities. Extensive Monte Carlo analysis tests all efficient taxable/tax-exempt municipal bond combinations against thousands of possible operating scenarios with the goal of achieving the highest mean after-tax net income for the enterprise.

Dynamic Tax Analysis is one of the few industry tools that assesses the implications of varying operating results on overall profitability and consequently on investment strategy. In addition to the optimal municipal allocation, the analysis estimates the probability of your company paying AMT tax and calculates the minimum level of operating profitability (as measured by the combined ratio) required to avoid the AMT for a given municipal allocation.

Once AAM’s Dynamic Tax Analysis is complete, a fully tailored taxable/tax-exempt tax advantaged program can be executed that ensures participation in municipals when they offer incremental risk-adjusted benefits over taxable counterparts.

What Kind of Insurer Are You?

The kind of business your company underwrites will determine many aspects of your investment approach.

Property & Casualty

AAM can help you find the right mix of taxable and tax-exempt assets to generate the optimal after-tax net income.
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AAM's expertise in asset/liability modeling can help you maximize the spread between income and crediting rates.
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AAM can help you navigate a changing environment with appropriate liquidity.
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AAM can provide the advice and industry experience to help you make the right decisions for your members.
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