Global turmoil batters Japan life insurers' books
* Japan insurers say may freeze or sell Treasuries holdings
* Nikkei plunge, yen surge hurt insurer portfolios
* Mitsui and Asahi to raise funds to shore up capital
(For more on the financial crisis click on [nCRISIS])
TOKYO (Reuters) - A plunge in Tokyo shares and a surge in the yen battered Japanese life insurers in the six months to the end of September, making these conservative investors yet more cautious amid the global financial upheaval.
One of the top insurers, who together control assets roughly matching the economy of Spain, said it would even be moving some money out of U.S. Treasuries because of their falling yields.
"We will keep the amount of our foreign securities holdings but reshuffle them by moving funds from U.S. bonds to products that offer higher yields if possible," said an official at Meiji Yasuda Life Insurance, the nation's third-largest life insurer by assets.
Japan's top nine insurers held around $1.5 trillion of assets as of March, and market players keep a close watch on their plans because their investment moves can affect financial markets.
The 15 month-long credit crisis pushed Tokyo shares to their lowest levels in 26 years in October, cutting big insurers' unrealised profits on their securities holdings by more than half.
Mitsui Life Insurance posted unrealised losses of 55 billion yen on its investment portfolio, including losses of 87.6 billion yen mostly from foreign stock holdings through investment trusts and hedge funds.
Getting rid of bad investments cost the No. 5 insurer 37.9 billion yen in the six months to September, a jump from less than a billion yen a year ago.
No. 4 insurer Sumitomo Life said it had lost 80 percent of the unrealised gains on its securities holdings in the year to September, reducing these profits to 120 billion yen.
It also said it had reduced its unhedged foreign bond holdings since the summer and hedged all the remainder from currency risks, leading it to post a loss of 34.5 billion yen compared with a 13.7 billion yen loss a year earlier on its sales of securities.
TREASURIES LOSE SHINE
Yields on 10-year U.S. Treasuries dropped to a 50-year low below 3.0 percent US10YT=RR last week as recession fears pummeled stock markets and powered a frantic rush for the safety of bonds and cash.
That has brought down the yield spread between Treasuries and Japanese government bonds (JGBs), reducing the appeal of U.S. debt for Japanese investors.
"Given that the five-year U.S. Treasury yield is trading around 2 percent, the appeal of investing in them as a foreign asset is decreasing," said Shinichi Aizawa, general manager of the investment planning department at Dai-ichi Mutual Life Insurance.
"We are not considering new investments in (U.S. Treasuries)," said Aizawa. Dai-ichi Life held about 4.8 trillion yen ($50.5 billion) of foreign bonds at the end of September.
On Wednesday, the 10-year JGB yield JP10YTN=JBTC was near 1.4 percent. The Bank of Japan cut interest rates to 0.3 percent last month, the lowest among the developed economies. Five-year JGB yields traded around 0.8 percent JP5YTN=JBTC.
On top of the fall in stock prices, paper losses on foreign currency-denominated assets have risen as the yen has soared, prompting Mitsui Life to start raising 50 billion yen ($525 million) to shore up its capital.
Asahi Mutual Life insurance said it was mulling raising 35 billion yen by the end of the year to shore up its financial position.
(Editing by Hugh Lawson)
