Mitsui Sumitomo Insurance Co Ltd plans to continue investing in risk assets such as foreign stocks and bonds next financial year as its capacity for taking on risk has risen, a senior company executive said on October 22. The core company of MS&AD Insurance Group Holdings, Japan's largest property and casualty insurer group, once stopped taking risks after Thailand's devastating floods in 2011 exposed the company to more than 200 billion yen in losses. But it resumed investments in risk assets in 2013 and that trend will likely continue, Hiroaki Hara, manager of investment planning at Mitsui Sumitomo, told Reuters.
"We haven't decided on the final figure yet, but for next fiscal year, we are probably investing in about 30-40 billion yen ($282-$376 million) in foreign stocks and bonds, the same amount as this fiscal year," he said.
During the first half through September, the insurer has invested in about a half of the planned 30-40 billion yen in foreign assets and bonds, he said. While Japanese government bonds account for the largest part of the insurer's main assets, foreign currency-denominated stocks and bonds in such developed markets as the United States make up the bulk of its risk assets, he said.
Hara added that hedge funds and other alternative assets also account for a small amount.
Last month, the decision by the California Public Employees' Retirement System to pull all $4 billion it had invested in hedge funds shocked hedge fund managers, but Mitsui Sumitomo will continue its hedge fund programme. "We will continue asking private equity funds and hedge funds that we trust to manage our assets," Hara said.
Hara expects the 10-year Japanese government bond yield to trade between 0.4-0.6 percent until the end of this fiscal year in March, while he expects the Nikkei share average to trade between 14,000-16,000 for the same period, compared with 14,937.51.
He sees the dollar trading between 105-110 yen during the same period. "Our main scenario is that the yen will stay weak and stocks will stay high under the current monetary policy," he said. Mitsui Sumitomo has total assets of about 6 trillion yen as of June.