dai-ichi life’s investment strategy · 2016. 9. 8. · derivative transaction gains/losses 55.5...
TRANSCRIPT
Dai-ichi Life’s Investment Strategy
Tatsusaburo YamamotoExecutive Officer and General Manager, Investment Dept.
Review of results (Asset Allocation)
(Note) Asset shares are based on internal asset allocation criteria on an book value basis
Asset allocation of general fund (lhs)
Given the low interest rates in Japan, we limited JGB investments and focused on hedged foreign bonds (relatively attractive yield even after hedge cost) and selective credit investments.
JGB
Other Yen-denominated fixed income
assets
Hedged foreign bonds
Other assets
Risk assets
36
44.4% 42.6% 42.6%
24.4% 21.8% 19.0%
8.3%10.5% 14.3%
19.9% 21.6% 20.7%
3.0% 3.5% 3.4%
1.39%
1.14%
0.08%0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
0%
20%
40%
60%
80%
100%
2013.3末 2015.3末 2016.6末
68.8% 64.4% 61.6%
20-year JGB yield (rhs)
Mar-2013 Mar-2015 Jun-2016
Review of results (Investment Performance)
The yield on our yen-denominated bonds was less affected by the lower interest rates because we limited new investments in this category.Positive spread increased due to increased exposure to hedged foreign bonds and other assets, as well as market recovery such as the weakening of the yen.
Yield trend on yen-denominated bonds Trend on positive/negative spread
1.92%
0.41%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
FY11 FY12 FY13 FY14 FY15
▲ 914
▲ 611
280
692
978
▲ 1,500
▲ 1,000
▲ 500
0
500
1,000
1,500
11年度 12年度 13年度 14年度 15年度
億円
Dai-ichiDai-ichi
20yr JGB20yr JGB
37FY11 FY12 FY13 FY14 FY15
1QFY2016
Fundamental Profit 86.4
Positive spread 4.0
Capital gains/losses 54.5
Gains/losses onsale of securities 36.9
Derivative transactiongains/losses 55.5
Ordinary revenue 120.2
59.3Net income(non-consolidated)
Review of investment activities in Q1 FY2016
38100
105
110
115
120
125
130
1,000
1,200
1,400
1,600
1,800
2,000
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
(yen)(billions of yen)
Increased hedged foreign bonds within fixed income assets: reduced exposure to risk asset category such as equities and un-hedged foreign bonds with the use of derivatives as well as sale of security.Secured ‘Positive Spread’ and derivative transaction gains in the Q1 under yen-strengthening period.
Major activities in 1Q Review of 1Q performance (condensed: billions of yen)
Yen-fixed income assetsYen-fixed income assets
Hedged foreign bondsHedged foreign bonds
Risk assets (incl. derivatives)Risk assets (incl. derivatives)
ca.+800 bil.ca.+800 bil.
Domestic & foreign equitiesDomestic & foreign equities
Un-hedged foreign bondsUn-hedged foreign bonds
ca (200) bil.ca (200) bil.
ca (200) bil.ca (200) bil.<Balance of un-hedged foreign bonds>
Un-hedged foreign bonds (lhs)
JPY/USD (rhs)
(note) Asset shares are based on internal asset allocation criteria on an book value basis
50
60
70
80
1970 1990 2010 2030 2050
Working age population will peak out globallyWorking age population will peak out globally
Low economic growth and low inflation rates are anticipated in the medium term, due to structural factors
Low interest rates Low interest rates to continue
Tightening Easing
Developed countries:
Lower external demand
Emerging countries: Growth expected due to
population increases starts deteriorating
Stagnant resource
prices(crude oil)
Structural issuesStructural issues Monetary policyMonetary policy
Monetary easing spreads globallyMonetary easing spreads globally
Developed countries
Developed countries ChinaChina
Emerging countriesEmerging countries
Financial MarketsFinancial Markets
Some space for easing
Some space for easing
U.S. Europe
Japan
U.K.
Emerging countries
Brexit
New dimension of monetary easing
Cautiously seeking rate hike
Ratio of working age population(%)
Forecast
Source: United Nations
Global market forecast of mid-to-long term
Higher volatility
39
Overview of our mid-to-long term investment policy
Coping with a changing environment, we aim for a stable profit increase through an increase in accounting profit and an adequate control of economic value indicators
Easing : Low interest rates Tightening : Interest rate increases
Improvednet income
② Asset allocation with flexibility to respond to market changes (increased exposure to hedged foreign bonds and risk assets, selective credit investments)
③ Enhancing investments in new areas (project finance, asset finance etc.)
Cautiously monitoring signs of interest rate increase / widening spreadBuild hedge position for sudden rate hike
④ Control of asset duration utilizing derivatives
More investments in bonds/Asset duration to lengthen
⑤Joint product development with asset management companies / consolidation of asset management companies
Risk control on an economic
basis
Utilizing group resources
Financial market environment
Our
initi
ativ
es
Excellencein ALM Liabilities: Strategically managing liability profiles
(market-oriented sales and product strategy)
Assets: Further enhancing our mid-to-long-term portfolio simulation model①
40
ALM-based investments are supported by segmentation accounting and the initiatives laid out belowOn the asset side, we run our mid-to-long-term portfolio simulation model on the premise that lower rates will continue. On the liability side, the investment team was actively involved in setting up sales and product strategy.
Segmentation accounting Portfolio management initiatives
Liability side initiatives
①Excellence in ALM
Segmentation accounting and ALM initiatives
• Reducing assumed rates on return for single premium whole life
• Suspended underwriting group pension fund in general account and promoted sales of new product in separate account
Market-oriented sales and product strategy
• With the use of our economic scenario generator, portfolio simulations are conducted on the premise that lower domestic interest rates will continue
Further enhancing our mid-to-long-term portfolio simulation model
Adequate portfolio management strategy based on product profile / liability nature
Individual businessin general
Group pension business
Single premium whole life policies
・・・
Balanced portfolio(fixed income and risk asset)
Duration matching(largely fixed income)
Balanced portfolio(fixed income and risk asset)
・・・41
52%
32%
17%
0%
25%
50%
75%
100%
2016/3末
▲1%
0%
1%
2%
3%
4%
2013
年12
月
2014
年3月
2014
年6月
2014
年9月
2014
年12
月
2015
年3月
2015
年6月
2015
年9月
2015
年12
月
2016
年3月
2016
年6月
JGB 10yr.
Trend on yield (after hedge-cost basis ) Sector composition
US corp. bonds(※)
US treasury(※)
※10-year yield, after hedge cost
Increased exposure to hedged foreign bonds since second half of FY2013, in light of the relative attractiveness in yen-based yieldIncreased number of invested countries/currencies in view of revenue growth and risk diversification (32 countries, 22 currencies)Took credit risk selectively to maintain/enhance revenue
② Asset allocation with agility to market changes
Selective investments in hedged foreign bonds
Sovereign bonds at Europe(※)
MBS
Corporatebonds
Sovereign, municipal
61.6%47.9%
28.4%
27.4%
3.2%
8.2%
6.8%16.5%
0%
25%
50%
75%
100%
2012/3末 2016/3末
Other
AUD
EUR
USD
Currency composition
Dec
201
3M
ar 2
014
Jun
2014
Sep
201
4D
ec 2
014
Mar
201
5Ju
n 20
15S
ep 2
015
Dec
201
5M
ar 2
016
Jun
2016
Mar-2012
Mar-2016
Mar-201642
③ Enhancing investments in new areas
Enhancing investments in new areas
• Aiming both accounting profit and risk control on economic-value basis, we plan to enhance investments in new areas that have different sources of income (risk profile).In particular, areas of focus are hard asset areas such as the infrastructure sector
Purpose of investments in new areas Areas of focus
Strengthenearning power
Capture capital needs from growing areas and pursue
higher yield
First mover advantage
Move faster than competitors to invest in superior projects
Risk diversification
Diversify sources of returns
Build robust portfolio
小小
Interest rates Hard assets Opportunity
oriented
Debt in emerging countries
Equity in emerging countries
Global equities
Un-hedged foreign bonds
Hedged foreign bonds
Domestic public bonds
Foreign corp. bonds
Corp. loans
Domestic corp. bonds
Hedge funds
Securitized products
PE funds
Hybrids
Real estate
infrastructure sector
(direct/indirect)
Corporate operation
Low
ris
k/re
turn
High
Low
ris
k/re
turn
High
(risk profile)
Aircraftfinance
Areas of focus
43
• Took initiatives in setting up yen-denominated debt funds consisting of overseas infrastructure projects in investable countries that generate stable cash flows over the long term.Going forward, we will cultivate potential needs in public pension etc. and grow the fund size to 100 bil. Yen, and contribute to an expansion of infra-debt market.
Overview of the fund Purpose / feature of the fund
Life Insurers
Banks
• Investment opportunity in longer duration loan fund with lower risk (i.e. completed projects)
duration matching with long duration liability• Strengthen project finding capability• Investment needs
• Seek liquidity from loan receivablesfor completed infrastructure projects(balance sheet control, optimizing ROA)
Expected return Around 2% (on a JPY basis)
Investment destination
Diversified project finance-related investments that generate stable cash flows over the long term, such as completed/operating projects in investable countries
Infrastructure sector
Mizuho Bank
MGAIMizuho Global Alternative
Investments(wholly owned by Mizuho)
Dai-ichi Life
Potential needs in public pension etc.
Infrast-ructure
debt fund
Provide loansDai-ichi
participates in setting up funds
InvestInvest
Liquidity from loan receivables
(example) thermal power project (gas- and coal-fired),photovoltaic project
③ Enhancing investments in new areas Debt funding of overseas infrastructure projects, the first time ever in Japan
44
• We promote (a) increased investment options, (b) accumulation of expertise, and (c) human resource development, through a synergy between direct investment in infrastructure sector and investment through fundsWill accelerate more investment in the sector, and pursue both quality (quality projects) and quantity (increased investment options)
Project monitoring
Sharing know-how
The size of the world’s project finance market: approx. 300 billion USD a year
Investment division of Dai-ichi life
<The core of our investments in new areas>
Other financial institutions (banks / trust banks)
③ Enhancing investments in new areas Developing a new investment scheme in new investment horizon
Gain investment and administration know-howHuman resources development
Reduce project size constraint and more risk diversificationShare expertise
45
Interest swaps(receiving fixed interest)
Purchase super long bonds
Acc
ount
ing
prof
it
Income gains ✓ (decrease income yield of existing portfolio)
Capital gains (Hedge accounting, andfair value through OCI)
(huge capital gains but higher risk of losses in
interest rate hike scenario)
Eco
nom
ic
valu
e Control of interest rate risk ✓ ✓
Liquidity✓
(relatively more liquid compared to JGB)
-
We increased the asset duration using derivatives, taking into consideration the impact to accounting profit and economic value indicators as well as liquidity in the marketWith interest rate swaps, we were able to lengthen the asset duration of the fixed income portfolio by approximately 1 year compared to that of Sep. 2015.
Reducing interest rate risk
④Control of asset duration utilizing derivatives
Trend of asset duration
Duration of fixed income assets
including derivative positions
Position of interest swaps
Mar-2016
400 bil. yen
13
14
15
16
17
2013
/3末
2013
/9末
2014
/3末
2014
/9末
2015
/3末
2015
/9末
2016
/3末
Mar
-201
3
Sep
-201
3
Mar
-201
4
Sep
-201
4
Mar
-201
5
Sep
-201
5
Mar
-201
6
46
Duration of fixed income assets w/o derivative
positions
Understand customer needs
Leverage DIAM’s expertise
Product development utilizing group resources
Separate Account Balanced Fund II (April 2014 - )• Agile asset allocation based on signs of market
changes (such as volatility) and avoid losses on sudden interest rate hike and/or equity market correction
Separate Account Bond Fund (January 2016 - )• Securing stable income based on quantitative
analysis
Customer-centric product developmentMarket-oriented product development
050
100150200250
Mar
-14
Jun-
14
Sep-
14
Dec
-14
Mar
-15
Jun-
15
Sep-
15
Dec
-15
Mar
-16
Jun-
16
(Billions of yen)
Bond Fund
Balanced Fund II
We developed customer-centric and market-oriented products jointly with DIAM and other group resources. AUM of Separate Account Balanced Fund II successfully increased to 200+ billion yenWe will strive to increase AUM by providing better solutions to pension fund customers such as Separate Account Bond Fund, and also continue to engage in joint product development.
Trends in AUM and performance
-10%
0%
10%
20%
30%
40%
50%
-5%
0%
5%
10%
15%
20%
25%
Apr-1
4
Jul-1
4
Oct
-14
Jan-
15
Apr-1
5
Jul-1
5
Oct
-15
Jan-
16
Apr-1
6
Jul-1
6
Balanced Fund IINikkei 225
⑤Joint product development with asset management company
Synergies for Product Development
FY16 (Apr.-Jul.)fund performance
: +2.6% against Nikkei225
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Domestic financial market 1,700 trillion yen
Management Management fees
Overseas financial market
Premium income
②
Group synergy
Consolidated Consolidated income
Acting as investment engine
In addition to the corporate value increments at our asset management companies, they provide investment services to insurance companies within the group and grow their net incomeIn addition to the corporate value increments at our asset management companies, they provide investment services to insurance companies within the group and grow their net income
→
Collaborating each Collaborating each other (cross selling
of products)
⑤ Consolidate and strengthen asset management companies
Overview of initiatives in the asset management business
Management Management fees
Management Management fees
Management Management fees
Dividends
Consolidated Consolidated income Dividends
48
Aim to acquire investment money globally focusing around Japan
Core competences
To be a global asset management company which provides solutions by using its expertise in investment in Japan and Asia
- Carry out fiduciary duties of high standard and contribute to customers’ wealth management- Aim to increase AUM from 53 trillion to 100 trillion yen, (i.e. A leap from No.1 in Asia to Global Top 20)
To be a global asset management company which provides solutions by using its expertise in investment in Japan and Asia
- Carry out fiduciary duties of high standard and contribute to customers’ wealth management- Aim to increase AUM from 53 trillion to 100 trillion yen, (i.e. A leap from No.1 in Asia to Global Top 20)
⑤ Consolidate and strengthen asset management companies
Vision of Asset Management One
EuropeMarket
size 2,400 trillion yen
Australia & Asia(excluding Japan)
Marketsize 700 trillion yen
JapanMarket
size 400 trillion yen
North AmericaMarket
size 4,000 trillion yen
Asset Management One’s officesDai-ichi Life & its subsidiaries’ officesMizuho & its subsidiaries’ offices
※ Market size:McKinsey & Company (2014), at a rate of 1USD = 112 JPY
High reputation for asset management capability in domestic market (aiming to expand in Asian markets)Provide solutions to customers with quantitative analysis capabilityCompetitive cost efficiency in passive investment products supported by large AUM49
FY2016H2 ~ FY2018 (Integration stage)
Boost the share in publicly offered mutual fundsDevelop and promote new flagship productsNew products to capture the shift “ from savings to investments”(bank deposit substitute, products for DC)Pursue sales volume leveraging the wide distribution network
Enhance product development capability for institutional investorsCross selling to customer base of integrating 4 companiesPromote sales of high value added products such as alternative products
Revenue expansion
Retail market(mutual funds)
Institutionalinvestors
market
Overseas market
Cost efficiency
Accelerategrowth
Strategy to increase mandate from overseas fundsProducts tailored for overseas market (Domestic & Asian equity, smart beta fund)Sales efforts collaborating with parent companies
Streamlining products Operational efficiencyConsolidation of IT Systems Cost efficiency
2019 onwards
The new company puts priority to improve revenue and cost efficiency for the initial 3 years. Thereafter it will pursue growth acceleration in the long term.
⑤ Consolidate and strengthen asset management companies
Strategy of Asset Management One
50
Col
labo
ratin
g w
ith
each
oth
erAc
ting
as in
vest
men
t en
gine
until 2010 2011 2012 2013 2014 2015 2016 onwards
Janu
s pr
oduc
ts s
old
thro
ugh
DIA
MJa
nus
prod
ucts
sol
d th
roug
h D
IAM
Mutual funds
Pension funds
Large-size mandates
(Japan Post Ins.)
Started to sell bond MFs
Started to sell equity MFs
Governmental pension fund
on trust
Separate accountsDL
(group pension
biz.)
DL(group
pension biz.)
DIAM products
DIAM started investment
advisoryDIAM productsold through
Dai-ichi
DFLDFL Variable annuity
Separate Account
Balanced Fund II
Separate Account
Bond Fund
DIAM started
investment
Co-use of AM companies w/
Japan Post Insurance
Year 1999~
Year 2006~
Dai-ichi’s new alliance with Japan Post Insurance creates additional business collaboration opportunities in asset management area. Utilize asset management companies’ capability to strengthen wealth management functions of the groupBenefit of group synergy amounts to ca. 20% of DIAM’s revenue and ca 10%+ of Janus’ international operation and, accordingly contributes to revenues of life insurance companies within the group
Dai-ichi’s new alliance with Japan Post Insurance creates additional business collaboration opportunities in asset management area. Utilize asset management companies’ capability to strengthen wealth management functions of the groupBenefit of group synergy amounts to ca. 20% of DIAM’s revenue and ca 10%+ of Janus’ international operation and, accordingly contributes to revenues of life insurance companies within the group
Prote-ctive
Prote-ctive
Variable annuity
Janus started providing
investment services
⑤ Consolidate and strengthen asset management companies
Creating group synergies
51
Alliance with Japan Post Insurance
Common challenge Difficulties in finding investment opportunities to maintain profitability
Common solution
Expansion of investment area/method by developing new horizon and utilizing capabilities of external asset management experts
Both Japan Post Insurance and Dai-ichi have a similar liability profile and, accordingly, similar challenges. Through the joint effort to enhance investment functions, we strive to tackle the challenges.
Front OfficeFront Office
Middle OfficeMiddle Office
Back OfficeBack Office
Co-investing in infrastructure projects globallyJoint utilization of external asset managers as Joint utilization of external asset managers as a supplement to in-house investments
• More access to superior projects.• Strengthen earning power /
diversify risk
HR exchange by mutually seconding trainees
Sharing credit analysis expertise
• Nurture people who manage • Nurture people who manage investments in new areas
• Strengthen credit analysis functions
Co-investing in custody banks
Sharing know-how on securities administration
• Sharing platform of security • Sharing platform of security administration that is flexible enough for the changing environment
Mutual efforts in developing investment functions are being made. We will announce the progress as and when necessary.
• Mutual efforts in developing investment functions are being made. We will announce the progress as and when necessary.
52