Patent Issued for System for automated resource set multi-factor risk analysis (USPTO 11373129): Hartford Fire Insurance Company

2022 JUL 14 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Hartford Fire Insurance Company (Hartford, Connecticut, United States) has been issued patent number 11373129, according to news reporting originating out of Alexandria, Virginia, by NewsRx editors.

The patent’s inventors are Baker, Kylie J (San Francisco, CA, US), Fitzpatrick, Scott M (San Francisco, CA, US), Lucas, Theodore J (San Francisco, CA, US), Thomas, Mark D (Corte Madera, CA, US), Wojnar, Dariusz (Moraga, CA, US).

This patent was filed on August 3, 2020 and was published online on June 28, 2022.

From the background information supplied by the inventors, news correspondents obtained the following quote: “In some cases, an enterprise might want to select an index of resources from a plurality of resources of various types. Moreover, different types of resources might be associated with different current values and/or different levels of risk. By selecting appropriate resources, and allocating value to those resources, the future performance of the index of resources may be expected to behave in a desirable fashion. Manually selecting resources and/or allocating value to those resources can be a time consuming and error prone process-especially when there are a substantial number of potential resources and/or a substantial number of resources to be considered. By way of example only, the resources being considered by an enterprise might comprise equities or similar assets. In this case, risk, specifically how and where it is allocated, can have a substantial impact on whether an investment achieves its goals. For example, emerging-markets strategies that hew closely to a market-capitalization-weighted benchmark index might introduce a variety of risk distortions and other missed opportunities that may be unrecognized by the enterprise.

“It would therefore be desirable to provide systems and methods to automatically facilitate a multi-factor risk analysis for a set of resources in an automated, efficient, and accurate manner.”

Supplementing the background information on this patent, NewsRx reporters also obtained the inventors’ summary information for this patent: “According to some embodiments, systems, methods, apparatus, computer program code and means are provided to facilitate a multi-factor risk analysis for a set of resources in an automated, efficient, and accurate manner. In some embodiments, a multi-factor risk analysis system may include a resource data store defining, for each of a plurality of resources: a resource identifier, a current resource value, and a resource type. A back-end application computer server may establish a set of risk parameter diversification objectives and determine a set of eligible resources by accessing the resource data store. The server may then calculate a value factor characteristic and a momentum factor characteristic for each of the eligible resources. A set of index resources may be constructed from the set of eligible resources based on the risk parameter diversification objective and a risk optimization process utilizing a weighted value factor characteristic and momentum factor characteristic of each resource. An interactive user interface may then be rendered including indications associated with the constructed set of index resources, the value factor characteristics, and the momentum factor characteristics.

“Some embodiments comprise: means for establishing a set of risk parameter diversification objectives; means for determining a set of eligible resources by accessing a resource data store containing electronic records defining, for each of a plurality of resources: a resource identifier associated with an entity, a current resource value, and a resource type; means for calculating a value factor characteristic for each of the eligible resources; means for calculating a momentum factor characteristic for each of the eligible resources; means for automatically constructing a set of index resources from the set of eligible resources based on the risk parameter diversification objective and a risk optimization process utilizing a weighted value factor characteristic and momentum factor characteristic of each resource; and means for exchanging information with a remote user device to render an interactive user interface including indications associated with the constructed set of index resources, the value factor characteristics, and the momentum factor characteristics.

“In some embodiments, a communication interface associated with a back-end application computer server exchanges information with one or more remote user devices. The information may be exchanged, for example, via public and/or proprietary communication networks.

“Technical effects of some embodiments of the invention are improved and computerized ways to facilitate a multi-factor risk analysis for a set of resources in an automated, efficient, and accurate manner. With these and other advantages and features that will become hereinafter apparent, a more complete understanding of the nature of the invention can be obtained by referring to the following detailed description and to the drawings appended hereto.”

The claims supplied by the inventors are:

“1. A computerized method to facilitate a multi-factor risk analysis, comprising: receiving, by an automated back-end application server computer processor from a remote user device via a communication port and a distributed communication network, a transmitted request for a set of index resources; responsive to said request, establishing a set of risk parameter diversification objectives; determining a set of eligible resources by accessing a resource data store, wherein the resource data store contains electronic records defining, for each of a plurality of resources: a resource identifier associated with an entity, a current resource value, a resource type, and a resource location; calculating a value factor characteristic for each of the eligible resources; calculating a momentum factor characteristic for each of the eligible resources; automatically constructing the requested set of index resources from the set of eligible resources based on the risk parameter diversification objective and a risk optimization process utilizing a weighted value factor characteristic and momentum factor characteristic of each resource; exchanging information with the remote user device via the communication port to render an interactive user interface including indications associated with the requested set of index resources, the value factor characteristics, and the momentum factor characteristics; and automatically generating a plurality of reports including indications associated with the constructed set of index resources, the value factor characteristics, and the momentum factor characteristics, wherein the interactive user interface further includes a circular visualization associated with risk distortions such that: a graphical area within the circle is associated with an expected tail loss risk contribution based on resource location, a graphical length along the circumference of the circle is associated with at least one of an overall country capital allocation and an overall currency capital allocation, a length of a line extending outside and away from the circle is associated with an allocation to a particular equity or security, and graphical elements of the circular visualization may be interactively adjusted by a user to automatically change resource allocations.

“2. The method of claim 1, wherein the risk parameter diversification objectives are associated with at least one of: (i) geographic locations, and (ii) resource types.

“3. The method of claim 1, wherein the risk optimization process is further associated with at least one of: (i) factor expression, and (ii) volatility targets.

“4. The method of claim 1, wherein the risk optimization process is further adapted to minimize resource turnover.

“5. The method of claim 1, wherein said constructing is performed on a periodic basis.

“6. The method of claim 1, wherein the resources are associated with at least one of equities and assets, and further wherein the set of index resources comprises a portfolio.

“7. The method of claim 6, wherein the value factor characteristic is calculated based at least in part on: (i) an earnings yield, (ii) an Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”) divided by enterprise value, (iii) an enterprise value, (iv) an operating cash flow divided by enterprise value, (v) a revenue divided by enterprise value, (vi) a dividend yield, and (vii) a book value.

“8. The method of claim 6, further comprising: calculating a quality metric factor characteristic for each of the eligible resources, wherein the optimization process further utilizes the quality metric factor characteristic for each of the eligible resources.

“9. The method of claim 8, wherein the quality metric factor characteristic is calculated based at least in part on a gross profitability divided by a total value of assets.

“10. The method of claim 6, wherein the set of eligible resources are determined based on at least one of: (i) developed markets, (ii) United States equities, (iii) emerging markets, (iv) global small capitalization equities, and (v) Real Estate Investment Trusts (“REITs”).

“11. The method of claim 6, wherein the risk parameter diversification objectives are associated with at least one of: (i) countries, (ii) industry sectors, and (iii) property type.

“12. The method of claim 11, wherein the risk optimization process is further associated with groups of equities weighted in inverse proportion to risk as indicated by a standard deviation value, variance, estimated tail loss, or other risk measure.

“13. The method of claim 6, wherein the risk optimization process is associated with a linear optimization process with an added constraint associated with a targeted maximum estimated portfolio volatility relative to at least one of: (i) a reference benchmark index, and (ii) a market segment performance.

“14. The method of claim 13, wherein the estimated portfolio volatility is calculated via a covariance matrix based on returns of portfolio holdings and a relationship of those returns to each other, wherein the covariance matrix is reduced from a size equal to the square of assets in the portfolio to a smaller size.

“15. The method of claim 6, wherein the set of risk parameter diversification objectives are associated with at least two of: (i) portfolio risk, (ii) cost risk, (iii) structural risk, (iv) market risk, (v) liquidity risk, and (vi) tax risk.

“16. The method of claim 6, wherein the interactive user interface includes information about at least one of: (i) portfolio offensive characteristic, (ii) portfolio defensive characteristics, (iii) risk and return characteristics, and (iv) hypothetical risk and return characteristics.

“17. The method of claim 16, wherein the interactive user interface includes, for each of a benchmark set of resources, a first portfolio set of resources, and a second portfolio set of resources, a tabular presentation of at least one of: (i) weighted average portfolio characteristics, (ii) country and sector diversification, and (iii) a full period summary.

“18. A non-transitory, computer-readable medium storing instructions, that, when executed by a processor, cause the processor to perform a method to facilitate a multi-factor risk analysis, the method comprising: receiving, by an automated back-end application server computer processor from a remote user device via a communication port and a distributed communication network, a transmitted request for a set of index resources; responsive to said request, establishing a set of risk parameter diversification objectives; determining a set of eligible resources by accessing a resource data store, wherein the resource data store contains electronic records defining, for each of a plurality of resources: a resource identifier associated with an entity, a current resource value, a resource type, and a resource location; calculating a value factor characteristic for each of the eligible resources; calculating a momentum factor characteristic for each of the eligible resources; automatically constructing the requested set of index resources from the set of eligible resources based on the risk parameter diversification objective and a risk optimization process utilizing a weighted value factor characteristic and momentum factor characteristic of each resource; exchanging information with the remote user device via the communication port to render an interactive user interface including indications associated with the requested set of index resources, the value factor characteristics, and the momentum factor characteristics; and automatically generating a plurality of reports including indications associated with the constructed set of index resources, the value factor characteristics, and the momentum factor characteristics, wherein the interactive user interface further includes a circular visualization associated with risk distortions such that: a graphical area within the circle is associated with an expected tail loss risk contribution based on resource location, a graphical length along the circumference of the circle is associated with at least one of an overall country capital allocation and an overall currency capital allocation, a length of a line extending outside and away from the circle is associated with an allocation to a particular equity or security, and graphical elements of the circular visualization may be interactively adjusted by a user to automatically change resource allocations.

“19. The medium of claim 18, wherein the risk parameter diversification objectives are associated with at least one of: (i) geographic locations, and (ii) resource types.

“20. The medium of claim 19, wherein the risk optimization process is further associated with at least one of: (i) factor expression, and (ii) volatility targets.”

For the URL and additional information on this patent, see: Baker, Kylie J. System for automated resource set multi-factor risk analysis. U.S. Patent Number 11373129, filed August 3, 2020, and published online on June 28, 2022. Patent URL: http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=%2Fnetahtml%2FPTO%2Fsrchnum.htm&r=1&f=G&l=50&s1=11373129.PN.&OS=PN/11373129RS=PN/11373129

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