Allstate’s investments are managed to produce solid returns that support our business strategies while also advancing social goals like environmental protection, home ownership, community development and opportunities for diverse talent.
Investments that support our business objectives
Allstate manages more than $80 billion in assets (as of year-end 2013), invested in fixed income, equity and alternative assets, to support its claims-paying abilities in home and auto insurance and to provide financial security to policyholders via life insurance and annuity products. While our portfolio is primarily invested to generate competitive returns while keeping risk to appropriate levels, we also incorporate social responsibility into our overall approach.
To manage these investments, our seasoned investment team employs sophisticated economic forecasting tools and a strategic asset allocation approach. We align our investment portfolio with our company’s liabilities, matching each portfolio’s asset allocation with the risk constraints, time horizon and return requirements of the business it supports.
One area of continued focus is municipal bonds. As of December 31, 2013, Allstate held approximately $8.7 billion in bonds that help improve infrastructure and extend vital services in communities across the country. The portfolio is actively managed and well-diversified among states and sectors. Major holdings include bonds that help fund primary and secondary schools, public and private universities, hospitals, single and multi-family housing programs, green energy projects such as hydroelectric and wind-generated power plants, police and fire stations, libraries and community buildings, and economic development projects.
Nearly $1 billion in socially responsible assets under management
Within the larger $80 billion portfolio, Allstate allocates roughly $1 billion to socially responsible strategies. This includes a $75 million socially responsible investment (SRI) portfolio of fixed income, equity and other assets; an $800 million low-income housing tax credit (LIHTC) portfolio, and $100 million to a new Diversity and Emerging Managers program for identifying and developing minority- and women-owned fund managers in real estate and private equity.
Applying disciplined management to our SRI portfolio
Allstate has recently completed an overhaul of its legacy SRI portfolio, consolidating investments made over several years and putting stricter monitoring and performance measurement guidelines into place. The portfolio, with a market value of $75 million, holds a variety of debt, equity and community investments. The new structure will enable the investment team to monitor managers and funds more effectively—strengthening our ability to deliver competitive returns to our company while also achieving social objectives.
Creating new opportunities in low-income housing
The investment team also continues to hold a significant investment in LIHTC funds. The program uses private capital to finance new and rehabilitated affordable housing. In the aftermath of the 2008 credit crunch, investment in these vehicles declined sharply, forcing yields up. Allstate saw an opportunity to achieve two goals—strong investment returns and greater low-income housing availability. Over a two-year period, Allstate invested almost $800 million, earning an average after-tax yield of 12 percent to 12.5 percent, which is locked in for 10 years. The money was invested in 34 funds, whose managers invested in some 741 properties with over 60,000 affordably priced rental units.
Investing in environmental protection
A portion of Allstate’s investments help to mitigate the effects of climate change. Allstate considers environmentally friendly and socially responsible investment opportunities with attractive risk/reward trade-offs. The company’s investment portfolio now includes debt investments in wind, hydro, solar and geothermal projects. As of 2013, the company has invested approximately $320 million in renewable energy projects.