Allstate Corp., the largest publicly traded U.S. seller of auto and home insurance, said gross unrealized losses widened on energy bonds in the fourth quarter as crude prices plunged.
Losses climbed to $75 million as of Dec. 31 from $18 million three months earlier, Northbrook, Illinois-based Allstate said in an annual filing to regulators Thursday. Unrealized gains narrowed to $178 million from $234 million. The fluctuations are tracked by investors and ratings firms evaluating insurers’ financial strength and don’t count toward earnings.
“We continue to monitor the impact to our investment portfolio for those companies that may be adversely affected, both directly and indirectly,” by crude’s slump, Allstate said in the document. “If oil prices continue to decline or remain at depressed levels for an extended period, certain issuers and investments may come under pressure.”
Energy bonds have dropped on concern that exploration and production companies will struggle to pay their obligations after oil prices fell by about half since the middle of last year. The holdings have been a rare blemish in insurer bond portfolios that mostly gained as the Federal Reserve kept interest rates near record lows.
Allstate had $2 billion of unrealized gains as of Dec. 31 on its corporate bond portfolio, up from $1.93 billion on Sept. 30. The corporates were valued at about $42 billion at year-end, with 12 percent of that sum in the energy industry. Insurers hold bonds to back obligations to policyholders.
Hartford, Travelers
Hartford Financial Services Group Inc., which provides business coverage and also auto insurance, said in December that it cut some holdings of energy-related bonds. Travelers Cos., the lone property-casualty insurer in the Dow Jones Industrial Average, said last month that it had about $224 million of junk bonds tied to the industry.
West Texas Intermediate futures have declined about 5 percent this year, after tumbling 46 percent in 2014. Allstate rose 0.7 percent to $71.22 at 11:42 a.m. in New York, extending its gain since Dec. 31 to 1.4 percent.