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Dai-ichi Life to Boost Japanese Bond Holdings in Second Half

Oct. 26 (Bloomberg) -- Dai-ichi Life Insurance Co., Japan’s second-biggest life insurer, said it plans to boost its holdings of Japanese government bonds in the fiscal second half, joining rivals in safeguarding returns.

The insurer, with about 30 trillion yen ($395 billion) in assets, plans to mainly invest in Japanese government bonds with maturities of around 20 years in the six months through March 2012, said Takashi Iida, a manager in the investment planning division. He declined to give figures, saying the information is private. By contrast, the insurer expects domestic stock holdings to decline in the second half, he said.

Dai-ichi Life joins Nippon Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co. in seeking stable returns through investing in fixed-income assets in a country with the world’s fastest-aging population. Japan’s sovereign bonds earned 2.3 percent in the fiscal first half ended Sept. 30, according to Bank of America Corp.’s Merrill Lynch index. The Nikkei 225 Stock Average slid 11 percent.

“We will continue to invest based on our asset-liability management,” Iida said at a press conference in Tokyo today. “We will probably be buying about the same amount we bought last year,” he said, referring to yen-denominated bonds.

Spain, Italy

Dai-ichi Life had about 300 billion yen invested in Italy and Spain as of July, and no stakes in Ireland, Portugal or Greece, Iida said. The insurer has since sold some of those investments, which were mostly in sovereign debt, he added.

Among other asset classes, Dai-ichi Life expects both overseas bonds with and without currency hedges to be unchanged in the second half, while loans will probably decrease, Iida said. Overseas equities, with some invested in emerging markets, will remain unchanged, as will alternative investments in areas such as hedge funds, he said. The insurer doesn’t have any specific investment strategy set for properties, Iida said.

Dai-ichi Life publicly listed its shares for the first time last year to expand fundraising options for acquisitions and partnerships as waning economic growth in Japan compounds the problem of the aging society and low birth rate. The stock has slid 35 percent this year and closed at 85,400 yen on the Tokyo Stock Exchange today before the investment announcement.

Following are Dai-ichi Life’s market forecasts for the fiscal second half through March 2012. The ranges refer to where the insurer expects securities to trade during the period.

                                  Range      Year-End Projection
Japan’s 10-year bond yields:    0.9% - 1.4%         1.2%
U.S. 10-year note yields:       1.5% - 3.5%         3.0%
Yen against the dollar:           70 - 85           80
Yen against the euro:            100 - 120          110
Nikkei 225 Stock Average:      8,000 - 11,000       10,500
Dow Jones Industrial Average: 10,000 - 12,500       12,000

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Komaki Ito in Tokyo at kito@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net.

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