Mitsui Sumitomo Insurance, a Tokyo-based insurer with JPY7.57 trillion (USD61 billion) in assets, is considering purchasing its first synthetic collateralized debt obligation in the coming months, likely referenced to Japanese credits. The firm is the result of a merger this month between Sumitomo Marine & Fire Insurance and Mitsui Marine & Fire Insurance. Both have previously invested in the synthetic CDO market, but the combined entity will be more active than the sum of its parts, said Akihiro Yoshikawa, deputy manager of the financial solutions department in Tokyo. The two insurers had a combined synthetic CDO portfolio of around USD3 billion prior to the merger.
The insurer will look to enter the synthetic CDO market once the dust settles, likely within three months, according to an official. It will look to buy a synthetic CDO based on Japanese credits because it is familiar with the reference credits. It is also keen to avoid U.S. names because of deteriorating credit quality in corporate America.
"We'll look to become an active player," Yoshikawa said. The insurer will invest in the AAA rated tranches, putting USD50-60 million in each investment. The insurer is in discussion with J.P. Morgan and Deutsche Securities about entering a deal. He declined further comment.
Seiko Adachi, spokeswoman at Deutsche Securities in Tokyo, declined comment and Atsuko Yoshitsugu, spokeswoman at J.P. Morgan, did not return calls.
