April 24, 2020 / 8:35 AM / a month ago

UPDATE 1-Meiji Yasuda Life to increase foreign risk assets in FY2020/21

* To allocate 30% on overseas risk assets for diversification

* Plans to increase holdings of foreign bonds with FX-hedge

* Says returns on FX-hedged U.S. Treasuries not favourable

* Plans to cut back domestic stocks to reduce risks (Adds details, comments)

By Tomo Uetake

SYDNEY, April 24 (Reuters) - Japan’s Meiji Yasuda Life Insurance Co plans to increase foreign risk assets in the fiscal year ending March 2021, while cutting exposure to domestic stocks, a senior company official said on Friday.

The company plans to allocate about 30% of the 2.75 trillion yen ($25.6 billion) investment budget it has for the year that started earlier this month on overseas risk assets, such as bonds without currency hedge and foreign mutual funds.

Japan’s third-largest private life insurer aims to diversify its income revenue sources, saying it expects the U.S. economy to gradually recover once the coronavirus epidemic is contained.

Meiji Yasuda plans to allocate around another third of the budget to yen fixed income assets — yen bonds or currency-hedged foreign bonds — said Koichi Nakano, general manager of the investment planning and research department.

Expected returns from hedged foreign bonds are dwindling as U.S. and European debt yields have plunged while currency hedge costs spiked last month due to a global dollar shortage.

“With regard to currency-hedged foreign bonds, we will be investing not only in sovereign debt but also Ginnie Mae’s MBS and so on. It’s true that we can’t get a decent return if we buy U.S. Treasuries with extra dollar hedge costs,” Nakano said.

“As for Europe, we need to carefully monitor the coronavirus infections in the region.”

Meiji Yasuda plans to allocate almost 700 billion yen, or about a quarter of its investment budget, on domestic credit products, real estate and domestic lending, Nakano said.

The life insurer, on the other hand, looks to reduce the holdings of Japanese stocks to reduce risks.

Following a market meltdown caused by the COVID-19 pandemic, the company’s unrealised gains from domestic stock portfolio slid to 1.75 trillion yen ($16.3 billion) by the end of March, down 570 billion yen from a year earlier.

Meiji Yasuda had total assets of 40.5 trillion yen as of last December. ($1 = 107.6200 yen) (Reporting Tomo Uetake, Daiki Iga and Hideyuki Sano; Editing by Jacqueling Wong)

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