The stable investment portfolios of Australian insurers will come under pressure as the eurozone crisis grows, according to a leading investment manager.

He says any exposure to the poor performing countries such as Greece, Spain and Italy will have an impact on asset returns, and that will translate into the bottom line for Australian insurers.

Omega Global Investors Fixed Income Portfolio Manager Mathew McCrum told insuranceNEWS.com.au government bonds are still the best-performing investment asset class giving a 13% return.

But insurers will only avoid problems with their fixed interest asset allocations if they have chosen their investments wisely.

“Investors need to be careful about government bonds from Italy, Spain, Greece and Ireland,” he said.

How much exposure to European bonds Australian insurers have will be revealed in the end-of-year reporting season. But some insurers are already taking steps to reduce their exposure to the region.

Dai-ichi Life has reduced its eurozone bond exposure from ¥1900 billion ($24.3 billion) in March 2011 to ¥1100 billion ($14.1 billion) at March 31 this year.

The giant Japanese insurer’s accounts reveal it has ¥61.9 billion ($791 million) of Italian government bonds in its portfolio and ¥44.8 billion ($573 million) of Spanish bonds.

Some Australian insurers have shunned bond markets altogether. Calliden Group CEO Nick Kirk says his company is “100% in Australian bank deposits”.

“We came out of fixed interest investments last year,” he told insuranceNEWS.com.au.

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