Nippon Life to Invest 600 Billion Yen, Mainly in Japan Bonds
Nippon Life Insurance Co., Japan’s biggest life insurer, said it plans to invest 600 billion yen ($6.6 billion) in the fiscal second half, mainly in yen- denominated bonds as it seeks stable returns.
The Tokyo-based company, with about 45 trillion yen in assets, will also boost holdings in overseas bonds with currency hedges and domestic and foreign equities in the six months through March 31, according to its investment plan.
The nation’s life insurers, mostly mutual societies owned by policyholders, are betting on the safety of fixed-income investments, even as global stock markets recover amid optimism that the worst of the financial crisis may be over.
“The core of our investments will be yen-denominated bonds that will generate stable income revenue for us,” said Tomiji Akabayashi, general manager of the insurer’s finance and investment planning division. “But we will be seeking to invest in other assets whenever there is an opportunity where things are left undervalued.”
In the fiscal first half ended Sept. 30, Nippon Life boosted its investments in overseas bonds with currency hedges, by 1.4 trillion yen, taking advantage of low hedging cost, Akabayashi said. It also increased holdings of domestic and overseas stocks by 150 billion yen.
Unrealized Gains
The Nikkei 225 Stock Average jumped 25 percent in the fiscal first half, rebounding from its biggest annual decline in the 12 months ended March 31. The yen gained about 10 percent versus the dollar during the same period.
Benchmark 10-year Japanese government bonds rose during the six months ended Sept. 30, pushing yields down 4.5 basis points. Holders of JGBs, as they are known, gained 1.1 percent on their investments during the period, as measured by Merrill Lynch & Co. indexes.
Nippon Life’s unrealized gain on its investments for the fiscal first half stood at 2.47 trillion yen, compared with 1.05 trillion yen at the end of March.
Holdings in domestic bonds remained unchanged in the fiscal first half, while investments in overseas bonds without currency hedges declined by 500 billion yen as the yen strengthened, Akabayashi said.
Nippon Life’s three smaller rivals — Dai-ichi Mutual Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co. — revealed plans last week to increase their holdings on yen-denominated bond.
In contrast to Nippon Life, Dai-ichi Mutual said it planned to maintain its present investments in domestic and overseas stocks, while Meiji Yasuda said it would reduce domestic equities and “slightly” increase investments in overseas stocks. Sumitomo Life said it would “slightly” reduce domestic and overseas equities.
Among other asset classes, Nippon Life plans to increase investments in overseas bonds without currency hedges and real estate investments in the second half, with the net impact over the full year leaving the holdings unchanged from the previous 12 months.
*T Nippon Life’s market forecasts:
Range Year-End Projection Japan’s 10-year bond yields: 1.2% – 1.6% 1.4% U.S. 10-year note yields: 2.0% – 4.0% 3.0% Yen against the dollar: 80 – 100 90 Yen against the euro: 115 – 135 125 Nikkei 225 Stock Average: 8,000 – 11,000 10,000 Dow Jones Industrial Average: 7,000 – 11,000 9,000
