Portuguese insurers may invest more in the corporate debt market after the crisis in Europe subsided and yields on sovereign bonds declined, an industry group said.
“If there’s stability in Europe, it’s natural that the drop in sovereign debt yields will lead to a higher tendency to invest in corporate bonds,” Pedro Seixas Vale, president of the Portuguese Insurers Association, said in an interview at the group’s headquarters in Lisbon yesterday.
Portugal’s firms are lining up to issue debt after the country sold 2.5 billion euros ($3.2 billion) of five-year bonds in January, the first sale since it requested a bailout in 2011, say lenders including Banco Espirito Santo SA, the country’s biggest by market value. The yield on 10-year bonds dropped by a percentage point so far this year, trading at 6.2 percent today.
Investments in corporate bonds by the Portuguese insurance industry dropped 1.4 percent to 19.6 billion euros last year, as firms bought more sovereign debt, the association said. Still, purchases of corporate bonds as a percentage of total bond investments were greater than for sovereign bonds, it said.
Seixas Vale said investment in Portuguese sovereign debt by insurers will stabilize in the next few years. The amount totalled about 9 billion euros last year, close to 70 percent of total investment in sovereign debt globally, according to the associations’ figures. Spanish and Italian bonds were the next preferred choice among sovereign debt, he said.
Profit at Portuguese insurers rose to 541.5 million euros in 2012 from 10.2 million euros a year earlier after gains from debt holdings, according to provisional data from the country’s insurance association. Profit in life insurance rose to 740 million euros from a loss of 65 million euros in 2011, it said.