Cigna Corp., the U.S. health insurer that operates in 30 countries, is buying corporate bonds and selling some municipal debt, Chief Executive Officer David Cordani said.
“The high-quality corporates are enabling a pretty nice yield outcome versus what some of the risk-return tradeoffs are perceived to be in some of the munis,” Cordani said today in an interview at Bloomberg LP’s New York headquarters.
Cigna’s investment in state and municipal bonds fell to $2.46 billion at the end of last year from $2.52 billion at the end of 2009, according to company filings. Over the same period, corporate bonds excluding public utilities rose to $10.4 billion from $8.5 billion.
Investment-grade corporate bonds in the U.S. have gained 2.5 percent this year compared with 1.2 percent during the same period in 2011, according to Bank of America Merrill Lynch index data tracking price and interest income. Similarly rated municipals have returned 2.4 percent so far in 2012, the data show.
Funds that buy investment-grade corporate debt this year have reported net additions of $16.8 billion through March 7, more than half of the $30.3 billion recorded in all of 2011, according to research firm EPFR Global.
Meanwhile, investors added about $1.2 billion to U.S. municipal-bond mutual funds in the week through March 7, the biggest addition in more than two years and the 14th straight week that funds added assets, Lipper US Fund Flows data show.
Shift From Stocks
“There’s also a bit of a shift from equities” to fixed-income assets, Cordani said. Cigna had $16.4 billion of fixed-income investments at the end of 2011, compared with $13.9 billion in 2009, according to data compiled by Bloomberg.
Investor demand has pushed down spreads between global company bonds and comparable government debt by 58 basis points, or 0.58 percentage point, in the first two months of the year to 209 basis points, according to the Bank of America Merrill Lynch Global Broad Market Corporate Index. That’s the biggest decline to start a year since the index began in 1996.