Managing Municipal Bonds for Property and Casualty Insurance Companies for Total Return
Karen Szerszen, CFA Senior Credit Research Analyst Allstate Investments, LLC
The purpose of this chapter is to discuss some of the strategies and techniques used to manage a property and casualty insurance company’s tax-exempt portfolio on a total return basis. The goal of managing a portfolio on a total return basis is to maximize the portfolio’s value derived from the combination of interest income, gains or losses on securities sold, plus the change in market value of the portfolio. A property and casualty insurance company’s tax-exempt portfolio is managed within the content of maximizing the total return of the company’s total investment portfolio, subject to the investment constraints dictated by its management and by statutes unique to insurance companies. We begin with a brief review of the property and casualty insurance industry.


Property and casualty insurance companies are primarily in the business of collecting funds in exchange for a promise to payout cash to settle claims. This is known as the underwriting operations of an insurance company and, as discussed next, this segment of the company’s operations can be profitable or it can incur losses. Therefore, the investment portfolio of a property and casualty insurance company plays a critical role in the company’s operations. The investment portfolio not only ...

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