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MetLife, Prudential Financial raise exposure to Qatari debt after crisis

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MetLife, Prudential Financial raise exposure to Qatari debt after crisis

A number of major U.S. insurance companies increased their holdings in Qatari sovereign bonds in the year following a major Middle East diplomatic crisis, according to an S&P Global Market Intelligence analysis.

An examination of Schedule D investment filings shows that life, health and property and casualty insurers collectively held $916.5 million of debt issued by the state of Qatar at the end of 2017, around $23.8 million more than a year earlier.

Saudi Arabia led a bloc of Middle Eastern countries that severed relations with Qatar on June 5, 2017, citing the Persian Gulf state's alleged backing of terrorism. The group, which also comprises fellow Gulf Cooperation Council members United Arab Emirates and Bahrain, and regional ally Egypt, imposed a blockade on food items and denied airspace to the national carrier Qatar Airways. Several smaller countries in the Middle East and Africa also downgraded diplomatic ties in the following months.

Despite the crisis, Qatar's economy has remained resilient as it retains support from regional allies such as Turkey and Iran. Shipments of food and necessary items continue through ports in neutral GCC countries such as Oman and Kuwait, and exports of Qatar's natural gas resources have remained largely unaffected. Fitch Ratings lifted its outlook for Qatar from negative to stable earlier this week.

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Prudential Financial Inc. and MetLife Inc. increased exposure to Qatar-issued sovereign debt by 42.31% and 44.58%, respectively, in the year since the crisis. Prior to last year's spinoff, MetLife and Brighthouse Financial Inc. collectively held $117.9 million in bonds issued by the country. While Brighthouse's stake remains virtually unchanged, the two now-separate entities collectively carry $150.8 million in Qatar sovereign debt.

Among U.S. insurers, Northwestern Mutual Life Insurance Co. raised its position in Qatar bonds the most since the crisis. It reported holdings of $51.7 million as of Dec. 31, 2017, a more than five-fold increase from the $9.1 million held prior to the crisis. In carrying value terms, Northwestern Mutual's addition of $42.6 million to its Qatar sovereign debt position is even larger than that of Prudential or MetLife.

A handful of U.S. insurers did cut their holdings of Qatar's debt in the past year. Sammons Enterprises Inc. reported selling $47.7 million worth of Qatari sovereign debt on June 7, 2017, shortly after the regional rivals cut diplomatic ties.

Sammons sold its entire position to JP Morgan Securities Inc. for $51 million, recording a gain of nearly $3.3 million at disposal, according to the quarterly NAIC statements of subsidiaries North American Co. for Life & Health Insurance and Midland National Life Insurance Co. Sammons also reported selling $8 million in bonds issued by Qatari Diar Finance QSC to Nomura Holdings Inc. on the same date, disclosing a $500,000 gain on sale.

Liberty Mutual Holding Co. Inc. also disposed of its entire $18.1 million holding in Qatari debt during 2017, though Liberty Life Assurance Co. of Boston continues to hold a $7.2 million stake. Liberty Life was acquired by Lincoln National Corp. and Dai-ichi Life Holdings Inc. in a $2.84 billion deal announced Jan. 19.

More recently, American International Group Inc. reported that on Jan. 24 it sold off nearly $6.2 million in bonds issued by Qatar. The insurer had held $93.3 million in Qatar sovereign debt as of the end of 2017, according to investment holdings reported in annual NAIC statements.

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Click here to view country-level information about Qatar.

For additional information on Qatar's sovereign wealth funds, look up Qatar Investment Authority or Qatar Holding and click on "Investments" on the entities' tearsheets in S&P Capital IQ.