We strive to be thoughtful underwriters on both sides of our balance sheet, and we have always allocated our assets to support our insurance operations, not the reverse. Because the primary purpose of our investment portfolio is to fund future claims payments, Travelers employs a conservative investment approach. Our asset allocation gives us a high level of confidence that our capital is adequate to support our insurance business, in both good times and bad. Our approach has served us remarkably well over a long period and allows us to invest in our businesses with an eye to the future.
Our Chief Investment Officer — a member of our Management and Operating Committees — leads our investment department, which directly manages our fixed income assets (93% of our investment portfolio), as well as our investments in equity securities, real estate, private equity limited partnerships, hedge funds, real estate partnerships and joint ventures. The Investment and Capital Markets Committee of the Board oversees our investment strategy and the risks related to our investment portfolio (including valuation and credit risks), capital structure, financing arrangements and liquidity.
As of December 31, 2018, Travelers invested assets totaled $72.3 billion, of which 93% was invested in fixed maturity and short-term investments. This high-quality investment portfolio generated net investment income of $2.5 billion pre-tax ($2.1 billion after-tax) in 2018.
In addition to achieving appropriate risk-adjusted returns, our investments enable many environmental and social improvements. For example, we invest in municipal bonds that support water and sewer projects ($5.2 billion), which help mitigate pollution, provide safe drinking water, promote conservation and, in many cases, respond to changing climate conditions. Additionally, our investments in secondary education ($7.9 billion) and higher education ($3.6 billion) support enterprises directly involved in improving communities and the lives of their students. We also maintain smaller investments in renewable energy tax credits, which help fund solar farms, and low-income housing tax credits, which help build affordable housing, as well as other “green bonds.” See the Investment Portfolio section in our 10-K for a detailed breakdown of our investment portfolio. For additional detailed information related to our investment holdings, please see our most currently available annual audited statutory basis financial statements for the Travelers Combined Pool, and other non-pooled entities, which includes a summary of the investments held by investment type, country and credit rating where applicable in the Summary Investment Schedule (Exhibit 2 for the Travelers Combined Pool Audit; Exhibit 1 for the other non-pooled entities audits) and the Supplemental Investment Risks Interrogatories (Exhibit 3 for the Travelers Combined Pool Audit; Exhibit 2 for the other non-pooled entities audits).
Travelers recognizes the importance of environmental, social and governance (ESG) factors in assessing the sustainability of the entities in which we invest. Travelers has traditionally followed a conservative investment philosophy, which limits our exposure to public equity securities and other riskier asset classes. Since Travelers invests overwhelmingly in fixed income securities, our analysis of ESG factors focuses primarily on credit risk. Our Investment Policy, approved by our Board of Directors, reflects a long-term approach to sustainable value creation and requires that Travelers consider ESG factors in the investment process, to the extent relevant.
With respect to our fixed income investments, we invest using a variety of qualitative and quantitative criteria that take into account both expected returns and risks including interest rate, credit, prepayment and other risks. Our fundamental investment process weighs, on an appropriate basis, financial statement data, management information, relevant ESG factors, third-party research and other information. Our asset allocation process considers the expected return advantages offered in the market in compensation for bearing various risks, such as credit risk, the environmental impacts of various industries and other social and governance factors.
For example, in our municipal bond, mortgage and real estate investments, we consider the impact that changing climate trends may have on any given city, state or region. Since we assume catastrophe risks such as earthquakes and windstorms in our capacity as an insurer, we also seek to manage our portfolio’s credit risk to such events by assessing our investment exposures in impacted geographic areas. In addition, for municipal bond issuers in the Southwestern United States and other areas of the country susceptible to drought, all investment analyses include an assessment of water supply adequacy.
For further discussion on the incorporation of ESG factors in our investment process and the impact of the regulatory environment in which we operate on the investments we make, please see our SASB disclosure.