Tokyo: Japan’s Dai-ichi Mutual Life Insurance Co said on Thursday it plans to make few changes to its portfolio in the second half of this fiscal year while reshuffling some individual assets.
The nation’s second-largest life insurer by assets told Reuters that investments in unhedged foreign bonds were little changed in the first half and that the insurer plans to keep them unchanged in the October-March period.
Despite of the ongoing global financial market turmoil, the insurer does not plan to alter its medium- to long-term strategy of diversifying its asset holdings, said Takashi Iida, manager of the investment planning department at Dai-ichi Life.
“We plan to keep unchanged the outstanding amount of unhedged foreign bond investments, which we see as risk assets, while reshuffling individual names,” Iida said.
The yen’s sharp gains against the dollar and euro may result in unrealised losses on its foreign asset holdings but the insurer is not making imminent changes, he said.
“There is no change to our medium- to long-term strategy of diversifying our portfolio and risks by investing in risk assets to some extent,” Iida said.
The insurer uses the Lehman Brothers global aggregate bond index in deciding its foreign bond investments.
As of end-March, Dai-ichi Life managed 30.36 trillion yen ($311.7 billion) on behalf of its policyholders, of which 4.2 trillion yen was invested in foreign bonds.
Global financial markets will remain volatile but are likely to gradually regain some stability as fears of a worsening of the credit crisis appear to be abating, after governments and central banks around the world took bold steps to unlock frozen credit markets, Iida said.
He expects the yen to come under strengthening pressure as differences in interest rates with other countries shrink.
He expects the dollar to be in a 95-110 yen range and the euro between 130-145 yen through March 2009. The dollar fell to a seven-month low below 97.23 yen and the euro sank to a six-year low below 124 yen on Thursday.
Dai-ichi had said in April it may slightly increase holdings in overseas stocks and alternative investments such as funds of funds this fiscal year as it further seeks to diversify assets, but Iida said the insurer kept these investments unchanged given the market turmoil.
“We would like to keep alternative investments steady in the second half. If market conditions deteriorate further and we are forced to cut losses, we hope to reallocate to better ones,” he said, adding the insurer doesn’t plan to close its positions.
In the April-September half, Dai-ichi Life boosted its yen bond holdings when yields rose around June, and shifted a portion of yen bond allocations to hedged foreign bonds which it categorises as fixed-rate bonds together with yen bonds.
“In terms of allocation weightings, we kept fixed-rate bonds steady in the first half, and plan to keep that weighting unchanged in the second half,” Iida said.
The insurer may buy more long- and superlong-dated yen bonds when yields spike up.
Global economies will likely continue to be weighed down by the financial sector problems, but if more signs emerge that the worst of the credit crisis has passed, there is also the risk of sharp reversals in market trends, he said.
The insurer expects the 10-year JGB yield to trade between 1.2 percent and 1.8 percent through March. The 10-year JGB yield was at 1.505 percent on Thursday.
Dai-ichi Life also plans to keep its domestic share holdings steady.
At end-September, Dai-ichi Life had unrealised profits on its securities holdings of some 1 trillion yen, down from 1.649 trillion yen at end-March and down from 3.108 trillion yen at the end of September 2007.