Returns not ensured

Insurance companies have had a terrible 12 months. And the falling value of their equity investments is prompting questions about their credit quality and even their solvency.

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‘Indiscriminate widening’ is the phrase being bandied about among followers of insurance company debt. In the US, insurance companies have been left holding the bonds of a string of ‘problem credits’ – Tyco, WorldCom, Kmart and Dynergy – while in Europe their equity market investments have fallen in the region of 30% so far this year.

Spreads have widened much more than for banks partly because “in a falling equity market, investors find it difficult to understand the sector,” says

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