Moody’s changes Fukoku Mutual view

Moody's Investors Service said it affirmed the Baa1(hyb) subordinated bond rating of Fukoku Mutual Life Insurance Co. and changed the outlook to stable from positive.

The change in outlook reflects the increased level of risk from its unhedged foreign currency-denominated bond exposures in the past 18 months, and the lack of further improvement in its risk-based capitalization, Moody’s said.

“Fukoku Life is taking on additional foreign currency risk to pursue yields, given the ultralow interest rate environment in Japan and rising hedging costs. The company has been increasing asset allocations to unhedged foreign bonds,” the agency said in a news release.

“Based on Fukoku Life's financials on a standalone basis, such allocations formed 17.4% of its general account at the end of fiscal 2017, up from 11.8% at the end of fiscal 2016, leading to higher foreign currency risks in its investment portfolio.”

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