A.M. Best Says Enron Bankruptcy is Costly to Insurers

The failure of energy-trading giant Enron Corp. has hit the portfolios of several insurers with investment exposures as of Sept. 30, 2001, totaling more than $3 billion, according to an A.M. Best statistical study.

In total, the life/health insurance industry reported a market-value investment worth $2.8 billion as of Sept.30, 2001, with the majority of investment in corporate bonds, based on their quarterly filings with the National Association of Insurance Commissioners.

The property/casualty industry reported a market-value investment of $604 million for the same period, also with the majority of holdings in Enron’s corporate bonds.

Many life/health and property/casualty insurers hold Enron securities, including corporate bonds, common stocks and preferred stocks.

Among the highest reported values are John Hancock Financial Services Inc., with $320 million invested in Enron. Swiss Re held Enron bonds in its corporate bond portfolio, which has an estimated loss of $31 million, based on the market valuation in mid-December. The company also had exposure through its portfolio of credit default swaps amounting to $28 million.

Other companies affected include Hartford Financial Services, St. Paul Cos. and Reinsurance Group of America Inc.

The full 44-page A.M. Best statistical study provides details on the individual investments of the major insurance companies, including their holdings in Enron’s common and preferred stock and corporate bonds. The study shows the number of shares, book value, market value, statement value and actual costs as of Sept. 30, 2001, the most recent date for which data is available. Data on corporate bonds also includes the year bonds were acquired, maturity dates and rates.

A.M. Best expects to update this statistical study with year-end 2001 data when it becomes available, as certain positions might have been reduced after the quarterly filing, and some insurers will have to write down these assets.