CHAPTER 1: AN END IS A BEGINNING - Part 1
by Alton R. Cogert, CFA, CPA, CAIA
He couldn’t believe it. He had just been fired! Robert E. Short was the Chief Investment Officer for a medium sized insurance company—or rather, he had been. He had thought his work was well respected. Two months earlier his CEO had slapped him on the shoulder, asserting, “You’ve got a bright future with us, Bob.” Fast forward to two minutes ago. Voices in the hall and a knock on his door. Sixty seconds later he was unemployed. It was that quick.
Jim Greening, the Chief Financial Officer, was still talking across the desk. He’d said what he had come to say, and now he had the nerve to smile. Couldn’t the man summon the courtesy to shut his mouth and walk away? Bob tried to listen, but the shock of the moment left him battle-deaf, mute. He tried to concentrate, but his mind kept drifting off—to Iraq, of all places. And that was nearly twenty years ago!
Staring at Greening’s face, Bob was aware that his brain was blocking the other’s words. The odd thing was the flashback that replaced them. He was seeing himself in the hatch of his M2A2 Bradley Fighting Vehicle. The night was wonderfully clear and he was moving at speed over the rough desert surface of sun-split rocks while the hatch’s steel rim punched his ribs black and blue.
In 1991 Bob had been a young officer commanding a unit in the 24th Mechanized Infantry Division assigned to Desert Storm. To the left of them the French 6th Light Armored Division; to the right, the British 1st Armored Division. The combined Allied force had been ordered to attack into Iraq early on Sunday, February 24, 1991, from a point just west of Kuwait. Their wing formed part of the “left-hook” intended to knock out the Iraqi 45th Infantry Division before swinging east for a flanking attack on Saddam Hussein’s Republican Guard.
It was the French who hit the Iraqi 45th that night; it was the French who took the casualties.
“So that’s it, Bob. Times are tough and we have to hone our investment side to this department’s full potential.” Bob surfaced intermittently, listening to Greening’s words in equal parts shock, disbelief and fear. “I’m afraid you’re not the man to lead us forward here. We need someone more aggressive.” Bob recognized the fear in himself as he listened. He had known it before his unit had started to roll. It had seemed to dissipate the moment his Bradley’s wheels began to churn. [NOTE 1-1]
Bob was looking at Greening, but thinking about Susan. She had quit work before their child was born, and they had a year-old baby daughter to support. Without an income. The thought didn’t last. The starry orb of an Iraqi night eclipsed even his family from Bob’s mind.
Out in the desert, armed with the sophistication of modern weaponry, he had needed neither compass nor GPS. The vehicles advancing in line abreast behind him were driving through a storm of sand and grit churned by the leaders; but Bob, in the front line, was running in the clear. For minutes on end that night he could have charted their course by the North Star. West Point had taught him advanced electronics, battle tactics, command techniques—and celestial navigation for survival.
Across the desk Greening was saying, “…a chance to refresh your skills, Bob.” Then came the word “lacking,” and “Maybe you should take more courses in communication. We could arrange that in your outplacement package.”
Maybe, Bob told himself, he should have been a history teacher. The Academy’s Department of History (Motto: “Wisdom Through History”) had been the source of his favorite courses.
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What does the story of Bob Short have to do with investing for insurance companies?
Whether you have worked for an insurer, are currently doing so, or may do so in the future, parts of Short’s story may sound familiar. In fact, it plays an integral part in learning about how best to organize and execute the investment process for an insurer. Short works—I should say ‘worked’—for a medium-sized insurer, so some of his challenges may be too simple compared to those you face. However, the basic challenges are here, and you will have to confront them successfully if you are to provide the best possible investment results for the insurer.
So, how does one develop a successful investment process? An excellent question...[Read More}