Tighter investment spreads at life insurance companies have driven UBS Investment Research to change its credit rating on the sector’s bonds from "market perform" to "underweight." The primary reason for this change is that life insurers’ bonds are trading right around their market value.

"During ‘normal’ times, we have generally seen fair value for life insurers being five to 10 basis points wider than similarly rated banks. At this point, benchmark insurance credits are trading at or through banks," according to UBS’s July 23 credit policy report.

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