Allstate Corp. holds no general-obligation bonds of Illinois, where the insurer is based, as politicians haggle over a budget for the fiscal year that started July 1, Chief Executive Officer Thomas Wilson said.
“If you don’t like the income statement, the balance sheet or the governance, why would you loan them money just because they never defaulted before?” Wilson said in an interview Thursday at Bloomberg’s New York headquarters. “We have a philosophy that we’re not trying to take credit risk in the muni-bond world.”
The largest publicly traded U.S. home and auto insurer, whose ads say, “You’re in good hands with Allstate,” held $8.7 billion of municipal bonds as of March 31, down from about $25 billion in 2007. Wilson said in 2010 that borrowing by U.S. states “is way out of control.”
Wilson, who works at Allstate headquarters in Northbrook, a suburb north of Chicago, said he’s told state lawmakers: “How’re you going to go broke? Gradually, then suddenly.” He said he’s been involved with “Illinois is Broke,” a statewide campaign about fiscal issues created by The Civic Committee of the Commercial Club of Chicago.
Without a budget, the lowest-rated U.S. state can’t fully pay thousands of workers. It faces a $6.2 billion deficit this year and mounting pension liabilities after the state Supreme Court overturned a 2013 restructuring of the retirement system.
“Our problem in Illinois is we have a fight going on amongst leaders, so until that gets resolved, we probably won’t make any progress on the fiscal issues,” Wilson said.
Allstate has boosted holdings of bonds from California, which was once the worst-rated state but is now winning upgrades. Last week, Standard & Poor’s raised California to its highest rank in 14 years.
About 9.1 percent of the municipal debt Allstate holds was from the Golden State at the end of 2014, up from 8 percent a year earlier, company filings show.
“We’re not trying to hit the ball out of the park, we’re not trying to pick the timing on municipal bonds,” Wilson said. “If we just don’t like the trend line in the state, we won’t buy it.”