April 21, 2017 / 6:27 AM / 3 years ago

RPT-CORRECTED-INTERVIEW-Mitsui Sumitomo Insurance to boost Japanese corporate debt investment

(Repeats correction from April 16 due to technical reasons)

* Plans to boost Japanese corporate debt investment to 100 bln yen

* To invest about 60 bln-70 bln yen in risky assets

* Expects market trend not to change despite geopolitical risks

By Ayai Tomisawa and Noriyuki Hirata

TOKYO, April 14 (Reuters) - Japan’s Mitsui Sumitomo Insurance Co plans to increase its investment in Japanese corporate debt this fiscal year to hunt for higher yields amid the low-yielding domestic bond environment, a senior executive said on Friday.

The core company of MS&AD Insurance Group Holdings, which had 6.57 trillion yen in total assets as of Sept 2016, plans to invest about 100 billion yen in Japanese corporate bonds for the year ended March 2018, Tomonori Mano, manager of investment planning department at Mitsui Sumitomo, told Reuters in an interview. That’s an increase from 70 billion yen in investment during last fiscal year.

With Japanese government bond yields staying low under the Bank Of Japan’s negative interest rate policy, the insurer plans to keep its domestic bond assets flat this year.

“We have enough holdings of JGBs, so there is no point buying them just because they are trading slightly positive now,” Mano said. “The main investment in our domestic assets will be corporate bonds and loans.”

The insurer expects the 10-year Japanese government bond yield to trade between zero to 0.2 percent throughout this fiscal year. On Friday, it was 0.02 percent.

With uncertainty around the upcoming French presidential election and rising U.S. tensions with Russia, North Korea and Syria, Mano said that although he acknowledges such risks, he expects overall market trends will not change.

“Geopolitical risks can create volatility in the market, but asset classes’ prices should eventually return to the pre-event levels, as we saw after Brexit and Trump’s election last year,” Mano said.

The insurer plans to buy 35 billion yen worth of foreign bonds. It also plans to invest in foreign stocks through exchange-traded funds.

“We see ETFs as convenient. As a non-life insurance company, we want to secure both liquidity and returns at the same time especially after we learned a lesson from Thailand floods,” Mano said, referring to Thailand’s devastating floods in 2011, which exposed the company to more than 200 billion yen in losses.

Last fiscal year, the insurer invested 70 billion to 80 billion yen in risky assets, such as foreign bonds, stocks and private equity commitments and the company has allocated 60 billion to 70 billion yen for such investments this fiscal year.

Mano expects the dollar to trade between 105-115 yen and the euro to trade between 110-130 yen.

Mitsui Sumitomo Insurance plans to cut holdings of domestic stocks as it is in the final year of a four-year plan to reduce such exposure by a total of 500 billion yen.

Many Japanese insurers have been slowly unwinding their cross-holdings of shares, recognising the risk they pose to their financial health.

Editing by Sam Holmes

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