What Is the Amsterdam Stock Exchange (AEX) .AS?

Founded in 1602, along with the creation of the Dutch East India Company (VOC), the Amsterdam Stock Exchange is considered the oldest, still-functioning stock exchange in the world.

The need for a bank grew with the prevalence of European trade and with the need to offer financiers a way to profit in this commerce. The Dutch East India Company was one of the earliest businesses to compete for the exports from the spice and slave trade. It was a joint-stock company and would offer shares to investors who would bankroll the voyages. Financiers required a safe and regulated place where buy and sell shares of these early global enterprises.

Before the AEX, many regions and towns had independent systems of asset valuation and trade regulation which operated much like stock exchanges, but the AEX was the first official stock exchange as we know it.

The Basics of the Amsterdam Stock Exchange (AEX) .AS

Over its centuries-long history, the Amsterdam Stock Exchange has gone through several ownership changes and governance structures.

Looking to recent history, in 1997 the Amsterdam Stock Exchange and the European Options Exchange (EOE) merged, and its blue-chip index was renamed AEX for “Amsterdam Exchange.”

In September 2000, the Amsterdam Stock Exchange merged with the Brussels Stock Exchange and the Paris Stock Exchange to form Euronext Amsterdam. Euronext is Europe’s largest cash equities market. For some time fell under the umbrella of NYSE Euronext, which operated several exchanges, including the New York Stock Exchange, the Liffe in London, and NYSE Arca Options. In 2014, Euronext was spun off to become an independent entity once again. As of 2017, Euronext was the sixth largest combined stock exchange by market cap.

Equity Indexes of the AEX

Euronext Amsterdam’s three broad equity indexes are the blue-chip AEX, mid-cap AMX, and small-cap AScX. By far, the most traded and influential index is the AEX, which began in 1983 and is composed of more than 20 of the most frequently traded Dutch companies which trade on Euronext Amsterdam. These companies include international businesses such as Unilever, ING Group, Philips, and Royal Dutch Shell. It is one of the leading national indices of the stock exchange group Euronext alongside Brussels’ BEL 20, Paris’s CAC 40, and Germany’s DAX.

Real World Example

Review of the composition of the AEX index is done each quarter, with a comprehensive review conducted in March and interim reviews in June, September, and December. Any changes made to the index as a result of these examinations take effect on the third Friday of the month. Before 2008, index changes were made only once annually in March.

The AEX is a market capitalization-weighted index, with initial index weightings of any one company capped at 15%. The index weights are calculated concerning the closing prices of the relevant companies on March 1. During quarterly reviews, weightings after adjustment are left as close as possible to those of the previous day and are not re-capped.

What Is Attribution Analysis?

Attribution analysis is a sophisticated method for evaluating the performance of a portfolio or fund manager. Also known as “return attribution” or “performance attribution,” it attempts to quantitatively analyze aspects of an active fund manager’s investment selections and decisions—and to identify sources of excess returns, especially as compared to an index or other benchmark.

For portfolio managers and investment firms, attribution analysis can be an effective tool to assess strategies. For investors, attribution analysis works as a way to assess the performance of fund or money managers.

How Attribution Analysis Works

Attribution analysis focuses on three factors: the manager’s investment picks and asset allocation, their investment style, and the market timing of their decisions and trades.

The method begins by identifying the asset class in which a fund manager chooses to invest. An asset class generally describes the type of investments that a manager chooses; within that, it can also get more specific, describing a geographical marketplace in which they originate and/or an industry sector. European fixed income debt or U.S. technology equities could both be examples.

Then, there is the allocation of the different assets—that is, what percentage of the portfolio is weighted to specific segments, sectors, or industries. 

Specifying the type of assets will help identify a general benchmark for the comparison of performance. Often, this benchmark will take the form of a market index, a basket of comparable assets.

Analyzing Investment Style

The next step in attribution analysis is to determine the manager’s investment style. Like the class identification discussed above, a style will provide a benchmark against which to gauge the manager’s performance.

The first method of style analysis concentrates on the nature of the manager’s holdings. If they are equities, for example, are they the stocks of large-cap or small-cap companies? Value- or growth-oriented?

American economist Bill Sharpe introduced the second type of style analysis in 1988. Returns-based style analysis (RBSA) charts a fund’s returns and seeks an index with comparable performance history. Sharpe refined this method with a technique that he called quadratic optimization, which allowed him to assign a blend of indices that correlated most closely to a manager’s returns.

Explaining Alpha

Once an attribution analyst identifies that blend, they can formulate a customized benchmark of returns against which they can evaluate the manager’s performance. Such an analysis should shine a light on the excess returns, or alpha, that the manager enjoys over those benchmarks.

The next step in attribution analysis attempts to explain that alpha. Is it due to the manager’s stock picks, selection of sectors, or market timing? To determine the alpha generated by their stock picks, an analyst must identify and subtract the portion of the alpha attributable to sector and timing. Again, this can be done by developing customize benchmarks based on the manager’s selected blend of sectors and the timing of their trades. If the alpha of the fund is 13%, it is possible to assign a certain slice of that 13% to sector selection and timing of entry and exit from those sectors. The remainder will be stock selection alpha.

Market Timing and Attribution Analysis

Though some managers employ a buy-and-hold strategy, most are constantly trading, making buy and sell decisions throughout a given period. Segmenting returns by activity can be useful, telling you if a manager’s decisions to add or subtract positions from the portfolio helped or hurt the final return—vis-à-vis a more passive buy-and-hold approach.

Enter market timing, the third big factor that goes into attribution analysis. A fair amount of debate exists on its importance, though.

Certainly, this is the most difficult part of attribute analysis to put into quantitative terms. To the extent that market timing can be measured, scholars point out the importance of gauging a manager’s returns against benchmarks reflective of upturns and downturns. Ideally, the fund will go up in bullish times and will decline less than the market in bearish periods.

Even so, some scholars note that a significant portion of a manager’s performance with respect to timing is random, or luck. As a result, in general, most analysts attribute less significance to market timing than asset selection and investment style.

What Is All Risks?

“All risks” refers to a type of insurance coverage that automatically covers any risk that the contract does not explicitly omit. For example, if an “all risk” homeowner’s policy does not expressly exclude flood coverage, then the house will be covered in the event of flood damage.

This type of policy is found only in the property-casualty market.

Understanding All Risks

Insurance providers generally offer two types of property coverage for homeowners and businesses—named perils and “all risks.” A named perils insurance contract only covers the perils stipulated explicitly in the policy.

For example, an insurance contract might specify that any home loss caused by fire or vandalism will be covered. Therefore, an insured who experiences a loss or damage caused by a flood cannot file a claim to his or her insurance provider, as a flood is not named as a peril under the insurance coverage. Under a named perils policy, the burden of proof is on the insured.

An all risks insurance contract covers the insured from all perils, except the ones specifically excluded from the list. Contrary to a named perils contract, an all risks policy does not name the risks covered, but instead, names the risks not covered. In so doing, any peril not named in the exclusions list is automatically covered.

The most common types of perils excluded from “all risks” include earthquake, war, government seizure or destruction, wear and tear, infestation, pollution, nuclear hazard, and market loss. An individual or business who requires coverage for any excluded event under “all risks” may have the option to pay an additional premium, known as a rider or floater, to have the peril included in the contract.

Burden of Proof

The trigger for coverage under an “all risks” policy is physical loss or damage to property. An insured must prove physical damage or loss has occurred before the burden of proof shifts to the insurer, who then has to prove that an exclusion applies to the coverage.

For example, a small business that experienced a power outage may file a claim citing physical loss. The insurance company, on the other hand, might reject the claim stating that the company experienced a loss of income from a mere loss of property use, which is not the same thing as a physical loss of property.

Special Considerations

Because “all risks” is the most comprehensive type of coverage available and protects the insured from a greater number of possible loss events, it is priced proportionately higher than other types of policies. The cost of this type of insurance should, therefore, be measured against the probability of a claim.

It is possible to have named perils and “all risks” in the same policy. For example, an insured may have a property insurance policy that has all risks coverage on the building and named perils on his personal property. Everyone should read the fine print of any insurance agreement to ensure that they understand what is excluded in the policy.

Also, just because an insurance policy is termed “all risks” does not mean that it covers “all risks” since the exclusions reduce the level of coverage that is offered. Make sure you look for the exclusions in any prospective policy.

The Bottom Line

All risk insurance, also called all risk coverage, is an insurance product that covers any incident that isn’t explicitly mentioned. These policies assume a good deal of risk for the insurer and are less common than named risk coverage, which states exactly what is covered, versus stating only what is to be omitted (which is the case with all risk).

What Is Aggregate Stop-Loss Insurance?

Aggregate stop-loss insurance is a policy designed to limit claim coverage (losses) to a specific amount. This coverage ensures that a catastrophic claim (specific stop-loss) or numerous claims (aggregate stop-loss) do not drain the financial reserves of a self-funded plan. Aggregate stop-loss protects the employer against claims that are higher than expected. If total claims exceed the aggregate limit, the stop-loss insurer covers the claims or reimburses the employer.

Understanding Aggregate Stop-Loss Insurance

Aggregate stop-loss insurance is held for self-funded insurance plans for which an employer assumes the financial risk of providing healthcare benefits to its employees. In practical terms, self-funded employers pay for each claim as it is presented instead of paying a fixed premium to an insurance carrier for a fully insured plan. Stop-loss insurance is similar to purchasing high-deductible insurance. The employer remains responsible for claim expenses under the deductible amount.

Stop-loss insurance differs from conventional employee benefit insurance. Stop-loss only covers the employer and provides no direct coverage to employees and health plan participants.

How Aggregate Stop-Loss Insurance Is Used

Aggregate stop-loss insurance is used by employers as coverage for risk against a high value of claims. Aggregate stop-loss insurance comes with a maximum level for claims. When a maximum threshold is exceeded, the employer no longer needs to make payments and may receive some reimbursements.

Aggregate stop-loss insurance can either be added to an existing insurance plan or purchased independently. The threshold is calculated based on a certain percentage of projected costs (called attachment points)—usually 125% of anticipated claims for the year.

An aggregate stop-loss threshold is usually variable and not fixed. This is because the threshold fluctuates as a percentage of an employer’s enrolled employees. The variable threshold is based on an aggregate attachment factor which is an important component in the calculation of a stop-loss level.

As is the case with high deductible plans, most stop-loss plans will have relatively low premiums. This is because the employer is expected to cover over 100% of the value of claims they receive.

Aggregate Stop-Loss Insurance Calculations

The aggregate attachment associated with a stop-loss plan is calculated as follows: 

Step 1

The employer and stop-loss insurance provider estimate the average dollar value of claims expected by employee per month. This value will depend on the employer’s estimate but often ranges from $200 to $500 per month.

Step 2

Assume the stop-loss plan uses a value of $200. This value would then be multiplied by the stop-loss attachment multiplier which usually ranges from 125% to 175%. Using a claims estimate of $200 and a stop-loss attachment multiplier of 1.25, the monthly deductible would be $250 per month per employee ($200 x 1.25 = $250).

Step 3

This deductible must then be multiplied by the employer’s plan enrollment for the month. Assuming that an employer has 100 employees in the first month of coverage, their total deductible would be $25,000 for the month ($250 x 100).

Step 4

Enrollment can potentially vary per month. Due to enrollment variance, aggregate stop-loss coverage may have either a monthly deductible or an annual deductible.

Step 5

With a monthly deductible, the amount an employer must pay could change every month. With an annual deductible, the amount the employer must pay would be summed for the year and usually based on estimates from the initial month of coverage. Many stop-loss plans will offer an annual deductible that is slightly lower than the summation of deductibles over 12 months.