Japan's Dai-ichi Life eyes Asia infrastructure finance

TOKYO Thu Feb 7, 2013 2:02am EST

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TOKYO Feb 7 (Reuters) - Dai-ichi Life Insurance Co , one of Japan's top four insurance companies, said it plans to invest in Southeast Asian infrastructure finance in the next three years, taking on a new investment area as it looks to boost returns.

Japanese life insurers are hungry for higher-yield alternatives to government bonds, but have been cautious about investing in riskier but potentially more profitable options, such as offshore project finance, due to a lack of credit risk expertise.

"In ASEAN countries, demand for infrastructure finance is strong," Hideyuki Ohashi, deputy general manager of Investment Planning at Dai-ichi Life told Reuters in an interview.

"As developed countries' interest rates will remain at low levels for a long time, we need to take new actions to enhance our absolute returns," he said.

Dai-ichi, the only listed company among Japan's four main life insurers, said it hopes to tap Southeast Asia's growth potential by providing finance to infrastructure projects, such as power generation and transportation.

Overseas project finance can offer a yield 2-3 percentage points above domestic bonds.

Japan's top banks including Mitsubishi UFJ Financial Group are the biggest arrangers for global project finance after traditionally strong European players retreated in the wake of the region's debt problems.

Arranger banks say the participation of long term-oriented investors like life insurers and pension funds would increase the steady flow of money in the field.

The move is part of Dai-ichi's plan to allocate at least 20-30 billion yen ($210-320 million) over next three years to Asia infrastructure, green projects like renewable energy, and growth businesses like health care.

Dai-ichi aims to invest in third-party infrastructure funds, given its lack of experience and the opportunity to diversify risk. It also wants to take part in projects whose debts are guaranteed by export credit agencies, such as Nippon Export and Investment Insurance (NEXI) and Japan Bank for International Cooperation (JBIC), Ohashi said.

Japanese life insurance companies have mostly shunned overseas project finance, with the last investment in 2004 when Nippon Life Insurance and Sumitomo Life Insurance took part in a $209 million project financing guaranteed by JBIC for a Brazilian subway operator, Thomson Reuters LPC data shows. ($1 = 93.3950 Japanese yen) (Additional reporting by Wakako Sato; Editing by Richard Pullin)

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