Dai-ichi Life Takes ¥140 Billion Loss Selling Off Long Bonds

(Bloomberg) — Dai-ichi Life Insurance Co. lost about ¥140 billion ($890 million) selling off bonds with longer maturities to prepare for higher interest rates. 

The insurer sold about ¥500 billion of Japanese government notes, mainly 20- to 40-year bonds, in the fiscal first half ended September. The sales were concentrated in the first half of the fiscal year and would be “more restrained” in the second half, the company’s president, Toshiaki Sumino, said in an interview. 

“We will continue to carry out replacement operations while paying attention to the impact on profits and losses” in the next fiscal year and beyond, Sumino said. “I don’t think the loss will have any impact on our financial soundness,” he added. Dai-ichi owns 18.9 trillion yen in yen-denominated bonds.  

Sumino expects the Bank of Japan to raise rates this month since the country’s economy is on track to recovery. The policy board led by Governor Kazuo Ueda opted to leave rates unchanged in December as he waited to assess the actions of US President-elect Donald Trump, who will take office this month. 

Sumino was based in the US during Trump’s first term and expects there will be both positive and negative aspects from the incoming administration. He is also concerned about the signs of polarization between the strong and weak companies, as some major Japanese firms have started to report significant declines in profits.

“I have some doubts about whether we can maintain an inflation rate of 2%,” said Sumino. For this reason, he expects the upper limit for 30-year bonds may be around 2.5% and 1.5% for 10-year bonds.

Sumino, who took office as president in April 2023, has been focused on boosting sales after the company pulled back following a scandal involving a former sales employee in 2020. In the first half of fiscal 2024, annualized premiums from new contracts were 55.9 billion yen, 2.5 times higher than in the same period of the previous year. This was the highest level since the first half of 2016. 

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