Investors play it safe with insurers

Investors in the insurance industry are continuing to be cautious, according to a report by rating agency Moody’s.

The report, Insurance CDS Spreads Tighten in Q1; Biggest Movers Are Genworth and AIG, found that investors have maintained a more negative view relative to Moody's ratings of the global insurance sector at the end of the first quarter of 2012, based on Moody's Global Insurance CDS Index, or MDYGIX.

The median CDS-implied ratings gap of companies in the index remained negative at quarter-end, after dropping below zero in late 2007. AIG and Genworth both saw a significant narrowing in their CDS-implied ratings gaps during the quarter, although the latter gave much of the improvement back at the start of Q2.

The median gap was negative 2.5 notches at the end of the first quarter, slightly wider than the 2.3 notches recorded at end-2011. And five-year mid-spreads narrowed across all insurance sectors, consistent although not as much as the broader corporate market.