Energy Bond Price Deterioration Could be Contagious to Insurers - Piper Jaffray (AIG) (MET) (AFL) (ALL)

Coinciding with the sharp drop in crude prices, pricing of energy-related bonds continues to deteriorate at a fairly rapid pace which in time may impact the insurers. Exposure is currently manageable, however, Piper Jaffray analyst, John Nadel, remains acutely aware of market pricing and the rising potential for impairments or downgrades or possibly even increased default risk.

Based on his analysis, the aggregate bond portfolio for the insurance sector has lost $4.5 billion in the last 30 days alone. The portfolio began the month at a value of $77.5 billion, implying a 6% reduction.

Companies with measurable energy debt holdings include: AFL, AIG, AIZ, AMP, HIG, LNC, MET, PFG, PRU, RGA, TMK, UNM, AEL, CNO, FGL, GNW, MFC, VOYA, ACE, ALL, THG, TRV and XL.

The analysis has caveats however:

1) we can only analyze bonds for which we can accurately pull both issuer sector and pricing data;

2) our estimate of unrealized gains or losses is based on our estimated cost basis per bond;

3) our estimate for fair value is based on the amount of bonds per holding, which in some cases is not directly available.

Related companies:

ACE Limited (NYSE: ACE)
American Equity Investment (NYSE: AEL)
Aflac (NYSE: AFL)
AIG (NYSE: AIG)
Assurant (NYSE: AIZ)
Allstate (NYSE: ALL)
Ameriprise Financial (NYSE: AMP)
CNO Financial Group (NYSE: CNO)
Fidelity & Guaranty (NYSE: FGL)
Genworth Financial (NYSE: GNW)
Hartford Financial (NYSE: HIG)
Lincoln National (NYSE: LNC)
MetLife (NYSE: MET)
Manulife Financial (NYSE: MFC)
Principal Financial Group (NYSE: PFG)
Prudential Financial (NYSE: PRU)
Reinsurance Group of America (NYSE: RGA)
Hanover Insurance Group (NYSE: THG)
Torchmark Corp. (NYSE: TMK)
Travelers (NYSE: TRV)
Unum Group (NYSE: UNM)
Voya Financial (NYSE: VOYA)
XL Group (NYSE: XL)

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