TOKYO -- Meiji Yasuda Life Insurance is increasing its holdings in domestic equities, investing a combined 50 billion yen ($418 million) through three stock funds.
With government bonds a core component of an insurer's portfolio, generating adequate returns has grown increasingly difficult as yields decline.
The Japanese insurer recently invested in actively managed and smart-beta funds run by Meiji Yasuda Asset Management. The actively managed fund focuses on companies standing to benefit from the government's growth strategy, such as those in the agricultural and environmental sectors. A smart-beta fund takes into account such factors as a company's fundamentals and share price volatility.
Life insurers generally invest in stocks for the dividend income over the long haul. The stock funds offer a way to potentially reap the benefits of growth sooner.
Meiji Yasuda Life's equity holdings came to roughly 1.8 trillion yen at the end of 2014 on a book basis, less than half the peak hit in fiscal 1994. The balance has steadily declined since then but may turn higher, considering that the company plans to continue investing in stock funds in fiscal 2015.
Life insurers were stung by massive write-downs on shareholdings after Japan's economic bubble burst, leading them to slim down their equity portfolios. A reversal of this trend across the industry would prop up stock prices.