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The practice of issuing securities where the repayments of  principal and interest on this principal are serviced from a defined set of predictable cash flows known as securitisation.

Australian banks and mortgage originators have securitised cash flows from their mortgage portfolios for many years. Australian wealth management companies have also securitised cash flows from their existing portfolios in order to achieve capital reductions or changes in their earnings profile. A number of life insurers have also investigated securitising the cash flows from life insurance business, and will probably do so when investment markets are favourable.

Deloitte Actuaries & Consultants work in unison with investments banks, law firms and other professional bodies to offer actuarial advice and projections on cash flow and to assist in identifying where securitisation is a valuable option.

A favourable option
The advantages of securitisation include:

  • improved cost of funding as the capital comes at a lower cost than equity capital
  • an alternative source of funding in the absence of debt or equity finance
  • the structures of the transaction can be rendered tax efficient to improve the pricing on the securities.

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