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Insurers shed PG&E bonds as credit ratings fell

After reports of PG&E Corp.'s connection with California wildfires broke in November 2018, bonds of the utility provider and subsidiary Pacific Gas and Electric Co. saw their credit ratings plunge. By the middle of that month, the securities had been downgraded by the top three rating agencies — S&P Global Ratings, Moody's and Fitch — to just one notch above junk-bond category.

Out of 15 insurers that had holdings of PG&E bonds worth more than $100 million at the end of 2018, seven suffered impairments due to declines in value. Allianz Group held onto a majority of its PG&E bond portfolio in 2018, but did write off $56.1 million of such assets, according to an analysis of annual regulatory statements. Axa and Prudential Financial Inc. booked impairments of $31.0 million and $29.0 million, respectively.

Among all insurance companies in this analysis, Allianz in 2018 held the largest amount of PG&E bonds, with an aggregate par value of $330.0 million as of year-end 2018.

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Several U.S. insurers sold their bonds before the company filed for Chapter 11 bankruptcy protection on Jan. 29. In terms of realized losses on the sales of those bonds, Northwestern Mutual Life Insurance Co. booked the highest 2018 loss at $19.3 million. Other insurance groups that reported more than $10.0 million realized losses were Wilton Re Ltd., which is owned by Canada Pension Plan Investment Board, and Guardian Life Insurance Co. of America at $18.0 million and $15.0 million, respectively.

Data for this analysis was compiled using annual statutory information as of Dec. 31, 2018. First-quarter data will be available by mid-May, but will only include details about insurers' acquisitions and disposals.

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S&P Global Market Intelligence provides multiple templates to assist in analyzing an insurer's investment portfolio.

Click here for a template that allows you to search for U.S. insurance company exposure to individual securities or securities issuers by CUSIP.