Hartford Financial Services Group Inc., the insurer with a $76 billion investment portfolio, has reduced holdings of bonds issued by energy companies amid a slump in oil prices.
“We’ve lightened up a little bit, about a couple hundred million” dollars, in an energy portfolio of about $3.6 billion, Chief Financial Officer Beth Bombara said today at a conference sponsored by Goldman Sachs Group Inc. in New York. “But that was it and, for the most part, there’s only about $300 million of it that’s below investment grade, and we feel really good about where we are.”
Energy companies have been battered by a decline in oil prices amid increased production in the U.S. and the decision by the Organization of Petroleum Exporting Countries not to cut production targets. Energy bonds rated below investment grade have dropped about 13 percent in the past six months.
Hartford, based in the Connecticut city of the same name, had about $60 billion of fixed-maturity securities available for sale as of Sept. 30. Insurers can hold bonds for decades to back policy obligations, making them less vulnerable to short-term price fluctuations.
“We think if oil stabilizes in the $55-to-$60-a-barrel range, the industry will be able to cash flow all its debt payments,” Chief Executive Officer Christopher Swift said. West Texas Intermediate crude oil futures are trading at less than $64 a barrel, compared with about $105 at the end of June.
Hartford said lower oil prices will probably encourage auto-insurance customers to drive more, which would lead to an increase in car accidents and claims costs. Distance traveled on U.S. roads increased by 2.3 percent in September, or 5.6 billion miles (9 billion kilometers), from a year earlier, according to the most recent monthly report from the Federal Highway Administration
“We do expect to see miles driven to go up,” Doug Elliot, the insurer’s president, said in the conference. “During the holidays there will probably be more people taking to their cars traveling.”
Hartford slipped 1.9 percent to $41.47 at 11:55 a.m. in New York. The company has advanced about 14 percent this year.
–With assistance from Sridhar Natarajan and Zachary Tracer in New York.
To contact the reporter on this story: Jing Cao in New York at hcao38@bloomberg.net To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net Steven Crabill