Japan's Mitsui Life Insurance plans to increase its domestic bond holdings by 200 billion yen ($2.4 billion) in the financial year to March 2012 as it seeks to reduce risk exposure and in response to the regulatory environment, a senior executive said on Friday.
Japan's fifth-largest private insurer with total assets of around 7.5 trillion yen may trim its foreign bond holdings, primarily in the first half of the fiscal year, Akihiro Fujioka, head of the insurer's investment planning department, told Reuters in an interview. The company has no plans to reduce its 100 percent currency hedging on the foreign bonds, Fujioka added.
"On the whole, we will continue to shift funds from stocks to bonds and within bonds, we will continue to shift to super-long bonds from short-term bonds," Fujioka said.
Fujioka said Mitsui expected the world economy to continue to grow modestly with limited inflation, helping the disaster-stricken Japanese economy to recover in the second half of the financial year that started on April 1. Mitsui and many other Japanese life insurers have been stepping up yen bond investment to match their long-term yen liabilities, thereby reducing their exposure to interest rate fluctuations.
Fujioka also cited new government regulations that took effect in April, which raise the risk weighting on stocks and other risky assets that insurers hold, as a reason behind shift to bonds.
As of last September, Mitsui Life held 2.863 billion yen of Japanese bonds as of September, nearly 70 percent of its securities investment. Its share holdings stood at 346 billion yen, about 8 percent of the total.
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