INVESTMENT MANAGEMENT ANALYSIS CASE STUDY: BAKRIE LIFE INSURANCE
By Muhammad Rifki 19004015
Undergraduate Program School of Business and Management Institut Teknologi Bandung 2007
VALIDATION PAGE
INVESTMENT MANAGEMENT ANALYSIS CASE STUDY: BAKRIE LIFE INSURANCE
By: MUHAMMAD RIFKI ID No: 19004015
Undergraduate Program School of Business and Management Institut Teknologi Bandung
Validated By
(Deddy P. Koesrindartoto)
INVESTMENT MANAGEMENT ANALYSIS CASE STUDY: BAKRIE LIFE INSURANCE Muhammad Rifki 19004015 Date of final examination: 10 August 2007 Date of graduation: 27 October 2007 Management Undergraduate Program, ITB, 2007 Thesis advisor: Deddy Pri Koesrindartoto
ABSTRACT In the company, role of investment is quite important. Sometimes investment gives big contribution to the company revenues especially in insurance business. Nowadays in insurance business, investment becomes one of its sources of revenue. According to Abdul Halim (2005: 4) basically investment is the allocation of funds at certain time with expectation to obtain the profit in the future. Generally the investment is divided into two kinds there are financial assets and real assets. From this statement it is strengthen the frame of thinking that investment will give big contribution to the company revenue. In this final project the topic of discussion is investment management analysis which conducted by doing research in Bakrie Life Insurance. Most of data which used in this final project is collected from Bakrie Life Insurance. In managing its investment activities, Bakrie Life Insurance diversified its investment into real investment and unreal investment. The meaning of unreal investment is the investment which done in the unreal assets such as stocks, bonds, time deposit, and others. On the other side the meaning of real investment is the investment which done in real assets such as property. In this final project the discussion will be focused on stocks and bonds which had historical data about its price and rate of return for the last three years since been purchased. To analyze the performance of Bakrie Life Insurance investment, the writer conducts the Expected Return and Risk analysis of each investment by several methods. The methods that used to analyze the expected return and risk are correlation method, comparison of expected return and risk method, minimum variance frontier method. Expected Return is the level of return which expected to be occurred in the future by analyzing the historical data. Meanwhile Risk is the level of deviation between the actual return and the expected return which probably occurs in the future. Keywords: Investment management, Minimum variance frontier, Correlations.
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ANALISA MANAJEMEN INVESTASI STUDI KASUS: BAKRIE LIFE INSURANCE Muhammad Rifki 19004015 Tanggal ujian akhir: 10 Agustus 2007 Tanggal wisuda: 27 Oktober 2007 Program Sarjana Manajemen, ITB, 2007 Pembimbing tugas akhir: Deddy Pri Koesrindartoto
ABSTRAKSI Pada sebuah perusahaan, peran dari kegiatan investasi cukup penting. Terkadang investasi memberikan kontribusi yang besar kepada pendapatan perusahaan khususnya pada bisnis asuransi. Saat ini dalam bisnis asuransi, investasi merupakan salah satu sumber pendapatannya. Menurut Abdul Halim (2005:4) pada hakikatnya investasi merupakan pengalokasian beberapa dana pada saat tertentu dengan harapan mendapatkan keuntungan di masa depan. Umumnya investasi dibagi 2 (dua) jenis yaitu investasi pada aset finansial dan aset riil. Pernyataan ini memperkuat kerangka berpikir bahwa investasi memberikan kontribusi yang cukup besar terhadap pendapatan perusahaan. Pada tugas akhir ini topik diskusi yang diangkat adalah analisa manajemen investasi dari perusahaan Asuransi Jiwa Bakrie. Jadi data yang akan digunakan di tugas akhir ini adalah data dari perusahaan Asuransi Jiwa Bakrie. Dalam mengatur kegiatan investasinya, Asuransi Jiwa Bakrie membagi investasinya menjadi investasi riil dan tidak riil. Yang dimaksud dengan investasi riil adalah investasi yang dilakukan pada aset riil seperti property. Sedangkan investasi tidak rill adalah investasi yang dilakukan pada aset tidak riil seperti saham, obligasi, deposito berjangka, dan lain-lain. Pada tugas akhir ini, pembahasan akan difokuskan pada investasi saham dan obligasi. Saham dan obligasi yang dianalisa dalam tugas akhir ini adalah saham yang memiliki data masa lalu tentang harga saham dan coupon rate selama 3 (tiga) tahun kebelakang sejak saham atau obligasi tersebut dibeli. Dalam menganalisa kinerja investasi Asuransi Jiwa Bakrie, penulis menggunakan beberapa metode yaitu metode Correlation Matrix, Minimum Variance Frontier, dan perbandingan antara Expected Return dengan Risk- nya. Expected Return adalah tingkat pengembalian yang diharapkan akan terjadi di waktu yang akan datang dengan menganalisa data-data masa lampaul. Sedangkan Risk adalah tingkat penyimpangan yang mungkin terjadi antara Actual Return dengan Expected Return-nya yang mungkin terjadi di masa yang akan datang. Kata kunci: Manajemen investasi, Minimum variance frontier, Korelasi.
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FOREWORD It is blessing from God that finally I accomplished my final project with subject “Investment Management Analysis” In Bakrie Life Insurance, therefore I wish to grateful to God. In composing my final project I conducted research in Bakrie Life Insurance from 15th January 2007 until 2nd July 2007, during that research I got full support and useful discussion with Officers of Bakrie Life Insurance.
The purpose to compose my final project is to fulfill one of the requirements to graduate from Undergraduate Program School of Business Management Bandung Institute of Technology.
I got many supports to accomplish my final project, therefore in this opportunity I would like to thanks a million to: 1. Mr. Deddy, my lecture and my counsellor who gave me motivation and guidance to speed up in composing my Final Project intensively. 2. My Parents who give me full support to accomplish this final project. 3. All my lectures in School of Business Management Bandung Institute of Technology. 4. Mr. Harry Prianto, Mr. Santo and Mr. Iryanto who gave me chance, full support and assistance to conduct research in Bakrie Life Insurance. 5. My friends who accompany me to make this Final Project even though we have to overnight.
As people say there is no perfect in the world, therefore I really appreciate if there is any suggestion to perfect my Final Project in order that to be more useful for School of Business Management Bandung Institute of Technology and especially for Bakrie Life Insurance .
25 July 2007
Muhammad Rifki iii
LIST OF CONTENTS
ABSTRACT………………………………………………... …….....
i
FOREWORD …………………………………………………….....
iii
LIST OF CONTENTS……………………………………... …….....
v
LIST OF FIGURES………………………………………. …….....
vii
LIST OF TABLES…………………………………. …….................
ix
CHAPTER I
INTRODUCTION...................................................
1
1.1 Background…………………………………….. …….....
1
1.2 Problem limitation…………………………...……..........
2
1.3 Problem formulation………………………………….....
3
1.4 The importance of problem solution………………….....
3
1.5 The objective and the use of the research …………….....
4
1.6 Systematic of writing…………………………...…….....
4
CHAPTER II
THEORETICAL FOUNDATION.........................
7
2.1 Literature review………………………………..…….....
7
2.1.1 Balance sheet………………………………......
7
2.1.1.1 The definition and the use of balance sheet………………………...
7
2.1.1.2 Elements of the balance sheet.............
7
2.1.2 Income statement……………………………...
8
2.1.2.1 The definition and the use of profit and loss statement……………
8
2.1.2.2 Elements of profit and loss statement…………………… …….....
9
2.1.3 Revenue………..……........................................
10
2.1.4 Investment management……………...…….....
11
2.1.4.1 Definition of investment………….....
11
2.1.4.2 Analysis method of the investment performance... …….....
11
2.2 Frame of thinking………………………………. …….....
15
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LIST OF CONTENTS
CHAPTER III
RESEARCH METHODOLOGY .........................
19
3.1 Research plan……………………………………............
19
3.2 Technique of data collections…………...........................
19
3.3 Data analysis method…………………………... .............
20
3.3.1 The analysis of investment management in unreal assets………………………..............
20
3.3.1.1 Correlation matrix method……………
21
3.3.1.2 Comparison expected return and risk method.....................................
21
3.3.1.3 Variance frontier method.....................
21
3.3.2 Analysis of the revenue structure……………...
21
CHAPTER IV
DATA COLLECTION AND ANALYSIS...........
23
4.1 Short brief of research object…………………………....
23
4.2 Revenue structure of Bakrie Life Insurance…………......
24
4.3 Investment of Bakrie Life Insurance…………………….
25
4.4 Data analysis.....................................................................
29
CHAPTER V
CONCLUSION AND SUGGESTION..................
47
5.1 Conclusion.......................................................................
49
5.2 Suggestion..……………………………………………..
50
REFERENCES………………………………………………………
51
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LIST OF FIGURES
Figure 2.1
Premium structure of Bakrie Life Insurance………………....
17
Figure 3.1
Diagram of process data collecting and data analyzing……..........................................................................
20
Expected return and risk of stock investment of Bakrie Life Insurance period 2004...........................................
31
Expected return and risk of stock portfolio of Bakrie Life Insurance period 2004 based on variance frontier........................................................
32
Expected return and risk of bond investment of Bakrie Life Insurance period 2004………..………………….
34
Expected return and risk of stock investment of Bakrie Life Insurance period 2005…………………………...
37
Expected return and risk of stock portfolio of Bakrie Life Insurance period 2005 based on variance frontier………………..…..........................
38
Expected return and risk of bond investment of Bakrie Life Insurance period 2005…………………………...
40
Expected return and risk of stock investment of Bakrie Life Insurance period 2006…………………………...
43
Expected return and risk of stock portfolio of Bakrie Life Insurance period 2006 based on variance frontier........................................................
44
Expected return and risk of bond investment in 2006…......................................................................................
46
Expected return and risk of total portfolio period 2004 – 2006………………………..……….................
47
Comparison of expected return between actual condition, same return and same risk since 2004 until 2006………………………………………...
48
Figure 4.1 Figure 4.2
Figure 4.3 Figure 4.4 Figure 4.5
Figure 4.6 Figure 4.7 Figure 4.8
Figure 4.9 Figure 4.10 Figure 4.11
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LIST OF TABLES
Table 4.1
Bakire Life Insurance’s financial statement 2001 – 2004...…
24
Table 4.2
Bakrie Life Insurance’s revenue of insurance premium year 2004………………………………………………………….
25
Table 4.3
Revenue of insurance premium year 2005 and 2006 period……………………………………………...
Table 4.4
Bakrie life insurance investment report of stocks year 2004……...……………………......................................
25
Table 4.5
Bakrie life insurance report of bonds year 2004…………….
26
Table 4.6
Bakrie life insurance investment report of stocks year 2005.…………...……………………………………....
26
Bakrie life insurance investment report of bonds year 2005……...…………...…...............................................
27
Bakrie life insurance investment report of stocks year 2006……...…………………...……………………..….
27
Bakrie life insurance investment report of bonds year 2006…..……………………………...……..…………..
28
Data of expected return and risk from stocks investment period 2004…………………………………………………..
29
Table 4.7 Table 4.8 Table 4.9 Table 4.10
25
Table 4.11
Correlation matrix between each stock in 2004.....................................................................................
Table 4.12
Proportion of stocks to optimize expected return and risk in year 2004..........…………………………….…....
33
Data of expected return and risk of bonds investment period 2004..............................................................................
34
Data of expected return and risk of stocks investment period 2005……………………….…...……………………..
35
Table 4.15
Correlation matrix between each stocks in 2005……………
36
Table 4.16
Proportion of stocks to optimize the expected return and risk in year 2005...............................................................
39
Data of expected return and risk of bonds investment period 2005………….………………………………………
39
Data of expected return and risk of stocks investment period 2006…………………………………………………..
41
Table 4.19
Correlation matrix between each stock in 2006………..……
42
Table 4.20
Proportion of stocks to optimize the expected return and risk in year 2006…………………………………….......
44
Table 4.13 Table 4.14
Table 4.17 Table 4.18
30
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LIST OF TABLES Table 4.21
Data of expected return and risk of bonds investment period 2006…...……………….….......................................... 45
Table 4.22
Expected return and risk of total portfolio period 2004 – 2006…...………...…………………………… 46
Table 4.23
Comparison of changing the proportion of investment of each stock……………………………...……………......... 48
Table 4.24
Summary of stock correlations of 2004 – 2006……………..
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