(For more stories from Japanese life insurers click)
* Daido Life cut foreign bond holdings by Y30 bln in H1
* Reduced domestic equity holdings by Y60 bln in H1
* Plans to keep foreign bond, Japan equities steady in H2
* Daido to increase yen bond holdings by about Y50 bln in H2
* Sees dollar between Y87 to Y100, euro Y125 to Y141 in H2
By Masayuki Kitano and Daiki Iga
TOKYO, Oct 19 (Reuters) - Japan's Daido Life Insurance plans to be cautious about taking fresh risks in areas such as foreign currency exposure and equities investment in the next six months, the insurer said on Monday.
Japan's top nine life insurers held around $1.6 trillion in assets as of March 2009 -- about the size of Brazil's economy -- and investors closely watch their plans because their investments can affect financial markets. "I don't think it can be said yet that the financial crisis is over, and we want to be cautious about risk-taking," Akio Shinju, general manager of Daido Life Insurance Co's investment planning department, told Reuters in an interview.
Daido Life, Japan's eighth-largest life insurer, reduced its foreign bond holdings by 30 billion yen ($330 million) in the April-September first half of the current financial year due to changes in its investment strategy related to its pension fund products, Shinju said.
Daido had previously conducted investment in assets such as equities and overseas assets for corporate clients that parked funds in its group pension product, but it has decided to focus on yen bonds instead, Shinju said.
"After last year's financial crisis, risk buffers declined, making it difficult to take on such risk," he said.
Daido Life has also decided to cut guaranteed yields on its group pension product to 0.75 percent starting next April, down from 1.25 percent, and such factors led to its decision to cut its foreign bond holdings in the first half, Shinju said.
Daido, Japan's eighth-largest life insurer, also reduced its holdings of domestic equities by about 60 billion yen in the first half.
Daido expects the benchmark Nikkei share average to trade between 8,500 to 11,500 in the second half, and may sell domestic equities if the index approaches or exceeds the top of that range, Shinju said.
"We would buy if it nears the bottom of the range, but since our company's strength has fallen compared to last year due to the financial crisis, we will be cautious on new risk-taking," he said.
The insurer plans to keep its holdings of foreign bonds and domestic equities steady in the second half, although its actual investment will hinge on market conditions, Shinju said.
FOREIGN CURRENCY EXPOSURE
Daido Life's foreign currency exposure now stands at about 2.5 percent of its overall assets, unchanged from the end of March.
"I think our foreign currency exposure is low so we are not planning much of a decrease even if the yen were to weaken. If the yen strengthens we would normally buy (foreign currencies) but we will move cautiously on that front," Shinju said.
Other Japanese insurers have also sounded wary of taking on foreign exchange risk, saying they are cautious about buying unhedged foreign bonds. Meiji Yasuda Life Insurance Co has said it plans to cut its unhedged foreign bond holdings by around $330 million in the second half.
Daido Life reduced its exposure to the greenback in the first half while raising its exposure to the euro, Shinju said, adding that the amounts involved in the shift were in the order of several billions of yen.
The dollar now accounts for a little over 60 percent of Daido Life's total foreign exchange exposure, down from about 70 percent at the end of March, he said.
The euro makes up about 35 percent of Daido's forex exposure, up from about 30 percent at the end of March.
Daido's forecast is for the dollar to trade between 87 yen to 100 yen in the six months to next March, and the euro to trade between 125 yen to 141 yen.
The dollar fell to 88.01 yen earlier in October, nearing its January low of 87.10 yen -- which was the lowest since 1995 -- as investors dumped the greenback on the view that the Federal Reserve will keep interest rates near zero for some time to help the economic recovery.
Daido Life plans to increase its yen bond holdings by roughly 50 billion yen in the second half after a similar 50 billion yen increase in the April-September period, Shinju said.
Such investment in yen bonds will consist of purchases of non-government bond issues including corporate and regional bonds, he added. (Editing by Joseph Radford)