Portfolio Statistics as of June 30, 2011
Investment Objectives
The objectives of our investment strategy are preserving Endurance's capital, providing a ready source of liquidity and generating value for shareholders. Therefore, our strategy focuses on book value growth as well as income, while considering our risk exposures. We use three key metrics to measure the performance of our portfolio: economic (marked-to-market) return, return on capital and net investment income.
Conservative Investment Approach
With a conservative approach to investment, our portfolio is dominated by high quality fixed income securities with smaller, diversifying allocations to alternative investments, equities and other sectors of the market. Endurance's fixed income portfolio maintained an average credit rating of AA, with 77% of our non-cash assets invested in AA-rated or higher securities.
With the goal of providing liquidity and a stable capital base to support our operations, asset-liability management is integral in our investment process. This approach ties portfolio management to the operational activity of the firm and helps minimize net market and liquidity risk to our capital. Due to our concern about rising interest rates and the risk/reward on long duration positioning, our fixed income portfolio duration is relatively low, at 2.28 years at June 30, 2011.
Investment income is a large component of our return on capital and an important source of financial stability. Net investment income totaled $92.3 million year to date through June 30, 2011.
Risk Management
We take a risk controlled approach to investing, ensuring that risk is always within preset tolerances and that we are properly compensated for the risks taken. The level of shareholder equity at risk is always a primary investment consideration. Risk management is an integral part of our investment process and we use several methodologies to effectively measure and manage risk, including scenario, value-at-risk and impairment analysis.