Allstate to shrink hedging program

By Dow Jones Newswires
Posted Feb. 10 at 8:46 a.m.

Insurer Allstate Corp. plans to reduce the size of a hedging program designed to protect its $100 billion investment portfolio from steep declines.

The insurer spent “over several hundred million dollars” on the hedges in 2010 to shield the portfolio from sharp interest rate increases or a substantial drop in equities, Chief Executive Tom Wilson said on a conference call with analysts and investors Thursday.

Allstate first put many of the hedges in place after $8.8 billion in pre-tax unrealized capital losses in 2008. But the portfolio has recovered substantially from the market lows brought on by the financial crisis.

“Given the substantial increases in our capital levels in 2010, we will reduce the size of these programs in 2011,” Wilson said on the call, which was convened to discuss fourth-quarter results.

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