PT - JOURNAL ARTICLE AU - Alexander Braun AU - Florian Schreiber TI - Performance Measurement in the Life Insurance Industry: <em>An Asset-Liability Perspective</em> AID - 10.3905/jfi.2020.1.102 DP - 2020 Dec 31 TA - The Journal of Fixed Income PG - 109--127 VI - 30 IP - 3 4099 - https://pm-research.com/content/30/3/109.short 4100 - https://pm-research.com/content/30/3/109.full AB - Established risk-adjusted investment performance measures such as the Sharpe Ratio, the Sortino Ratio, or the Calmar Ratio have been developed with an exclusive focus on the mutual and hedge fund industries. Consequently, they are less suited for liability-driven investors such as life insurance companies, whose portfolio choice is materially affected by the substantial interest rate sensitivity of their long-term contractual obligations. In order to tackle this limitation, we propose an Asset-Liability Sharpe Ratio, which is theoretically motivated, easy to estimate, incentive compatible, and conveys information that is not included in existing measures.TOPICS: Risk management, performance measurementKey Findings• Established risk-adjusted investment performance measures such as the Sharpe Ratio, the Sortino Ratio, or the Calmar Ratio have been developed with an exclusive focus on the mutual and hedge fund industries. • Consequently, they are less suited for liability-driven investors such as life insurance companies, whose portfolio choice is materially affected by the substantial interest rate sensitivity of their long-term contractual obligations. • In order to tackle this limitation, we propose an Asset-Liability Sharpe Ratio, which is theoretically motivated, easy to estimate, incentive compatible, and conveys information that is not included in existing measures.