October 24, 2019 / 10:09 AM / 22 days ago

Two big Japan life insurers cautious toward risk assets in October-March

TOKYO (Reuters) - Two big Japanese life insurance companies are taking a cautious stance on investment in risk assets such as stocks and foreign bonds without currency hedging, officials from the two companies said on Thursday.

Dai-ichi Life Insurance (8750.T), Japan’s second largest private life insurer, plans to reduce its holdings of Japanese stocks in the October-March financial half-year.

Meiji Yasuda Life Insurance [MEUY.UL], the third biggest, said it would look to increase its holdings of safe assets, including domestic bonds as well as foreign bonds with currency hedge.

While their investment approaches differ in some details, their stance reflected limited appetite for risk assets amid uncertainties about a U.S.-China trade war and as Japanese share prices have risen to a one-year high despite a sluggish economy.

“Although the U.S. Federal Reserve has cut rates for ‘insurance’, we will continue to be mindful of the possibility that the U.S. economy slips into a recession,” said Akifumi Kai, general manager of investment planning at Dai-ichi, told a news conference.

“We have a cautious stance on U.S. credit,” Kai added, explaining one of their risk-control indicators generated a signal that shows the U.S. credit market is on the verge of overheating.

Kai’s comments came after a top executive at Dai-ichi told Reuters that the insurer has revised its investment plans in the middle of the financial year to a risk-averse stance in an unusual move.

Kai said Dai-ichi’s stance on foreign bond investments for the October to March period depends on currency and interest rate levels, staying clear of any further details.

Rival Meiji Yasuda Life said it plans to reduce the holdings of foreign stocks in the six months through March after reducing them by 80 billion yen ($736 million) in the previous half-year.

The firm plans to maintain the holdings of domestic stocks flat after a reduction of 50 billion yen in the previous half- year, said Koichi Nakano, general manager of investment planning at Meiji Yasuda.

Nakano said the firm could buy foreign bonds without currency hedging - which carries big currency risk - only if there are opportunities to buy the dollar and other currencies cheaply.

It sees the dollar moving between 102 and 111 yen, compared to 108.65 yen JPY= on Thursday.

Japanese life insurers collectively hold about 370 trillion yen ($3.4 trillion) of assets under management and have been squeezed by plunging bond yields worldwide.

The stances of Dai-ichi Life and Meiji Yasuda contrast with that of Sumitomo Life Insurance, Japan’s No. 4 private life insurer. It said on Wednesday that it plans to increase its holdings of foreign bonds without currency hedging, as a recent drop in U.S. and European bond yields and elevated costs for dollar hedging have reduced the attraction of foreign bond investments that are currency hedged.

An official at smaller Taiyo Life Insurance, meanwhile, told Reuters that the firm plans to increase investments in foreign stocks in the current half year for higher dividends to offset falling income from bonds.

Reporting by Tomo Uetake and Hideyuki Sano; Editing by Susan Fenton

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