Awards 2011: Best bank overall: JP Morgan

JP Morgan is one of the handful of banks that has benefited from the financial crisis through the acquisition of Bear Stearns and Washington Mutual.

The bank says its strength is the ability to provide a one-stop-shop for insurance clients. This comes as a result of the integrated team that combines – on a European-wide basis – its global markets franchise with its investment banking group.

The insurance group provides expertise not only in risk management, asset liability management and actuarial advice, but it also claims unique access to clients on a senior level providing strategic market advice.

Tom Keatinge, London-based head of European insurance capital management at JP Morgan, says: “Our approach is to combine JP Morgan’s strong investment banking insurance-client franchise, with the broad product platform offered by our markets business. Being as big a player across markets as we are, we see flows, demand and trends that allow us to give clients balanced, product-agnostic advice, and provide first-class execution.”

JP Morgan’s innovative approach and industry knowledge has been recognised by its clients. John Mercer, chief investment officer at Co-op Asset Management, based in Manchester, says: “JP Morgan has been our top counterparty across a wide range of assets. Its approach is to employ keen, experienced staff and to come up with innovative ideas for a variety of situations that meet clients’ needs.”

Richard Watts, London-based head of investment solutions at F&C Asset Management, says: “JP Morgan has a proven track record of coming up with innovative solutions for pension and insurance clients and is consistently competitive across markets and products, even through periods of market stress and volatility.”

Michael Boes, Munich-based chief investment officer and head of asset liability management at Munich Re Group, adds: “JP Morgan has good visibility and understanding of the impact of different asset classes such as commodities, interest rates and inflation and equities. It has a large bench of people analysing the impacts of these different asset classes on an insurance company’s balance sheet and is a trusted adviser.”

JP Morgan aims to work with clients to identify risks that may not be obvious, integrating that with market anomalies and delivering hedges in a competitive fashion.

One such theme that the bank has helped implement for a number of insurance clients during the past year was a gilt asset-swap overlay, which came as a result of liabilities being discounted on gilts and originally duration hedged with interest rate swaps. Andreas Kalusche, managing director, strategic insurance advisory at JP Morgan, based in Franfurt, says: “The management of the gilt/swap, or more general government bond/swap spread, has become an important issue for insurers.”

Following the collapse of Lehman Brothers and the global financial crisis, gilt yields rose above swap yields and this made an overlay appropriate as it reduced the basis risk between assets and liabilities at an attractive market level. “With gilt yields rising above swap yields, this has given rise to a mismatch between assets and liabilities. Managing this mismatch, which can move fast given the velocity of interest rate changes, is important for insurers to manage capital volatility. This is particularly important under Solvency II,” adds Kalusche.

In another notable transaction, in January 2011, JP Morgan was involved in the world’s first longevity index hedge against increases in life expectancy of a pension plan’s non-retired members. The trustees of the Pall Pension Fund entered into a £70 million longevity hedge with JP Morgan based on future values of the bank’s LifeMetrics longevity index.

The firm has been a pioneer in the longevity swap market, executing the world’s first capital markets longevity swap in 2008, including both index-based and named-lives longevity swaps.