Life insurers moving into riskier bonds, rating agency says
The report said while below-investment-grade bonds as a percentage of capital remained flat last year, at about 46%, a few large companies allocated a greater portion of cash flow to such investments, and exposure is expected to rise this year. Below-investment-grade holdings topped 80% in 1990.</br></br>Insurance companies are increasing exposure to asset-backed securities. The rating company said it sees "modest signs" of weakening collateral.</br></br>Moody's said the recovery of commercial mortgages has rekindled interest in that area but noted there's still considerable risk. Insurers continued to cut investments in collateralized mortgage obligations and other mortgage-backed securities last year.</br></br>Joel S. Salomon, a Moody's analyst, said that another potentially worrisome trend is that more companies are becoming annuity writers, rather the "pure insurance" concerns. He noted that annuities, which are interest-sensitive, are more susceptible to money moving out.</br></br>The changes aren't expected to have any significant short-term impact on either the credit ratings or earnings of insurers but could potentially weaken ratings in the medium to long term, said Patrick Finnegan, a Moody's analyst.