Allstate manages its catastrophe and investment risk with sophisticated economic modeling and the informed judgment of a seasoned team of experts. We model property and casualty and financial services businesses on an integrated basis—looking at our entire portfolio of products and the associated risks to determine what investments should be made with the premiums.
We have been reducing our catastrophe exposure for more than 12 years, but significantly increased our efforts in 2004 and 2005 when it became clearer that the United States is in a period of substantially greater hurricane risk due to warmer oceans. Our first step was to mitigate this risk through extensive reinsurance purchases. In 2007, we spent nearly $900 million on reinsurance, which dramatically reduced our risk of loss.