A financial application to devise an optimal investment strategy using data developed for one of the largest publicly held insurance company
Client: Allstate is the largest publicly held personal lines property and casualty insurer in America, serving more than 16 million households nationwide.
Challenge: Allstate invests its insurance premiums in safe financial instruments. These investments are in billions of dollars which allow Allstate to yield a return on investment from insurance premiums. They also have to hold capital for payments to potential claims in the order defined by their actuarial tables. The investment is made in different type of bonds with different dividend yields, maturity, risks and tax treatment and the investment strategy has to take these variances into account. They were in need of a strategic optimization model through which they could get maximum return in a risk-free manner.
Solution: Allstate engaged SSI to develop an optimization model that would maximize returns on their investment in bonds based on their capital strategy. SSI’s team of data scientists and statisticians engaged in the project by collection and integration of data, and by understanding the model of investment. The team analyzed the targeted return of investment and capital needed to build an investment model. SSI built and delivered an optimization solver that would allow Allstate’s investment team to customize the investment model based on various scenarios. The model also allowed the investment team to back test their assumptions and build an optimal investment strategy.
Result: With the help of SSI Solution Allstate was able to design an investment model that was flexible to run various scenarios for their investment team and help them develop investment strategies that fit their objectives.