Alecta, Sweden’s largest occupational pension provider, made a 5.0% loss on its equity investments in the first half of this year, dragging returns down on both its defined benefit (DB) and defined contribution (DC) products.
Alecta’s DB pension product returned 0.1% in the six-month period, down from 5.1% in the same period last year, while its DC product — Alecta Optimal Pension — made a 1.8% investment loss, down from a positive return of 7.8% in the first half of 2015, the provider reported.
In its interim report for January to June 2016, Alecta said: “The comparatively weak performance in the first half was mainly due to a relatively low return on the equities portfolio.”
It was partly the case that the portfolio had dipped lower following several years of very strong growth of its holdings, and partly that the relatively high proportion of Swedish and European stocks put it at a disadvantage in the first half, the pensions provider said.
While equities made a 5.0% loss for Alecta on both DB and DC sides, fixed-income investments returned 3.5% on the DC side and 3.4% on the DB side, while property returned 3.3% on both sides.
This compares with the first half of 2015, when equities returned 10.5%, fixed-income produced 0.4% and property returned 7.8%.
The vast majority of Alecta’s assets under management relate to its DB product, at SEK672bn (€70.8bn) at the end of of June, compared to SEK60bn for the DC product.
Alecta’s group assets rose to SEK761bn at the end of June from SEK750bn.
Magnus Billing, chief executive, said the first half had been marked by big falls in global interest rates and equity markets, which bounced back in the second quarter after a weak start to the year, but which then fell sharply in relation to Brexit.
Premiums rose to SEK16.1bn in the first half from SEK14.7bn in the same period last year. Billing said the growth in premiums was due to the continued good development of Alecta Optimal Pension.
“Growth has been very strong and bodes well for Alecta’s continued success,” he said.
As a group, Alecta made an SEK41bn loss in the first half, compared to its SEK47bn profit in the same period last year.
He said Alecta’s results during the first half of 2016 had also been hit by higher technical provisions due to the lowering of the interest rate curve used to determine the level provisions needed to be.
“Our financial position shows that the company is well positioned to handle the continued uncertain market conditions and the continuing extremely low level of interest rates,” he said.
Alecta’s solvency ratio stood at 154% at the end of June, down from 171% at the same point last year.